<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
UNITED ROAD SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7549
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
94-3278455
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
8 AUTOMATION LANE
ALBANY, NEW YORK 12205
(518) 446-0140
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
EDWARD T. SHEEHAN
CHIEF EXECUTIVE OFFICER
UNITED ROAD SERVICES, INC.
8 AUTOMATION LANE
ALBANY, NEW YORK 12205
(518) 446-0140
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM OFFERING PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE PRICE PER AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value per share....... 6,325,000 $13.00 $82,225,000 $24,256
</TABLE>
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(1) Includes 825,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a).
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 26, 1998
PROSPECTUS
, 1998
5,500,000 SHARES
[LOGO] UNITED ROAD SERVICES, INC.
COMMON STOCK
All of the shares of common stock, $0.001 par value per share, offered hereby
are being offered by United Road Services, Inc.
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $11.00 and $13.00 per share. See "Underwriting" for information
relating to the factors that will be considered in determining the initial
public offering price.
Application has been made to have the Common Stock approved for listing on
the Nasdaq National Market under the symbol "URSI."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................................... $ $ $
Total(3)..................................... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $750,000.
(3) The Company has granted the Underwriters an option exercisable within 30
days after the date of this Prospectus to purchase up to an aggregate of
825,000 additional shares of Common Stock, on the same terms as set forth
above, at the Price to the Public, less the Underwriting Discounts and
Commissions, solely for the purpose of covering over-allotments, if any. If
such option is exercised in full, the total Price to the Public, Underwriting
Discounts and Commissions and Proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters
subject to prior sale, when, as and if delivered to and accepted by them,
subject to certain prior conditions. The Underwriters reserve the right to
reject any order in whole or in part. It is expected that delivery of the
shares of Common Stock will be made in New York, New York on or about
, 1998.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
<PAGE>
[Pictures of various towing and transport vehicles to be portrayed on inside
front cover]
The Company intends to furnish its stockholders with annual reports
containing financial statements for each fiscal year audited by independent
auditors.
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
Simultaneously with and as a condition to consummation of the offering made
by this Prospectus (the "Offering"), United Road Services, Inc. will acquire,
in separate acquisitions (the "Acquisitions") in exchange for cash and shares
of its common stock, par value $0.001 per share (the "Common Stock"), all of
the common stock and ownership interests of eight motor vehicle and equipment
towing and transport service companies (each a "Founding Company" and
collectively the "Founding Companies"). Unless otherwise indicated, all
references to the "Company" herein include the Founding Companies and United
Road Services, Inc., collectively, and references herein to United Road
Services mean United Road Services, Inc. prior to consummation of the
Acquisitions. For more information about the Acquisitions, see "Certain
Transactions."
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the related notes thereto, appearing elsewhere in this Prospectus.
Unless otherwise indicated, all share, per share and financial information in
this Prospectus: (i) has been adjusted to give effect to the Acquisitions; (ii)
assumes no exercise of the Underwriters' over-allotment option; (iii) assumes
an initial public offering price of $12.00 per share of Common Stock (the
"Offering Price"), which is the midpoint of the estimated range of the initial
public offering price; and (iv) has been adjusted to give effect to a 3.72-for-
1 split of the Common Stock effected in February 1998 and the amendment and
restatement of the Company's certificate of incorporation in February 1998.
THE COMPANY
United Road Services was formed in July 1997 to become a leading national
provider of motor vehicle and equipment towing and transport services.
Simultaneously with consummation of the Offering, United Road Services will
acquire eight towing and transport service companies with combined net revenue
of $46.5 million in 1997, making the Company one of the largest providers of
these services in North America. The Founding Companies have been in business
for periods ranging from seven to 48 years and operate an aggregate of 17
facilities located in seven states. Combined net revenue of the Founding
Companies increased at a compound annual rate of approximately 26% from 1995
through 1997.
The Company offers a broad range of towing and transport services, including
towing, impounding and storing motor vehicles, conducting lien sales and
auctions of abandoned vehicles, and transporting new and used vehicles,
insurance salvage vehicles and heavy construction equipment. The Company
derives revenue from towing and transport services based on distance, time or
fixed charges and from impounding and storage services based on daily fees. In
the event that impounded vehicles are not claimed by their owners within
prescribed time periods, the Company is paid from the proceeds of lien sales or
auctions. The Company's customers include commercial entities, such as
automobile leasing companies, insurance companies, automobile auction
companies, automobile dealers, repair shops and fleet operators; law
enforcement agencies such as police, sheriff and highway patrol departments;
and individual motorists.
The Company estimates that the towing and transport service industry generated
net revenue of approximately $15 billion in North America in 1997. Based on
available industry data, the Company believes that the industry is highly
fragmented with over 40,000 operating businesses in North America, most of
which are small, local and owner-operated, with limited access to capital for
modernization and expansion. The Company believes that recent industry growth
has been driven primarily by the following factors: an increase in the number
and average age of registered vehicles; a rise in government mandates (and
increased enforcement of such mandates) against unlicensed or uninsured drivers
and unregistered vehicles, which results in higher demand for towing and
impounding services; the growing popularity of leasing which, according to the
National Automobile Dealers Association, has risen from 5% of all new auto
sales in 1985 to 30% in 1996, thereby increasing demand for transport services
to move off-lease vehicles to auctions and dealers for sale; and the increasing
mobility of the United States workforce, which has increased demand for
automobile transport in connection with career-related moves.
3
<PAGE>
STRATEGY
The Company believes there are significant opportunities for a national
provider of towing and transport services with high quality service to increase
revenue and profitability by expanding its scope of services and customer base,
achieving operating efficiencies and expanding through acquisitions. The
Company's management team includes executives with experience in implementing
acquisition programs and effectively integrating acquired businesses, and
representatives of the Founding Companies with significant contacts and
experience in the towing and transport service industry. The Company believes
that this management team and the fragmented nature of the industry will
provide the Company with the capability and opportunity to implement an
effective consolidation strategy. The Company expects to obtain a $50.0 million
revolving line of credit from Bank of America to be used, in part, to finance
future acquisitions.
OPERATING STRATEGY
Provide High Quality Service. The Company believes that timely,
professional and dependable service is the primary generator of repeat
business in the towing and transport service industry. The Company will
seek to capitalize on the particular strengths of the individual Founding
Companies to offer high quality service to all of its customers. The
Company intends to implement proven practices of the Founding Companies
throughout its operations in areas such as dispatching technology, driver
training and professionalism, preventive maintenance and safety.
Expand Scope of Services and Customer Base. The Company intends to expand
the scope of its services by introducing certain capabilities of the
individual Founding Companies in other markets where the Company believes
such services can be successfully marketed. The Company believes that its
size and financial and other resources will permit it to attract customers
and contracts that require greater towing, transporting and storage
capabilities than those possessed by local owner-operators. The Company
intends to utilize its geographic diversity to pursue additional business
from existing customers that operate on a regional or national basis, such
as leasing companies, insurance companies and automobile auction companies.
Achieve Operating Efficiencies. The Company will seek to achieve
operating efficiencies through improved asset utilization by implementing a
"hub-and-spoke" strategy within identified towing markets, with a
centralized hub for management, dispatch and maintenance operations that
supports multiple satellite truck and impound yards. The Company believes
that this strategy will allow it to provide timely service throughout a
particular market, while also enabling it to consolidate certain
duplicative systems and facilities, thereby spreading certain fixed costs
over a larger vehicle fleet. The Company also expects to realize cost
savings by centralizing certain administrative functions at its
headquarters in Albany, New York, including insurance, employee benefits,
accounting and risk management. In the future, the Company intends to use
its purchasing power to seek improved pricing in areas such as fuel,
vehicles and parts.
Maintain Local Expertise. The Company anticipates that the managements of
the Founding Companies and companies to be acquired in the future will
continue to maintain local control of their daily operations. The Company
believes that this will allow it to take advantage of the local and
regional market knowledge, name recognition and customer relationships
possessed by each acquired company.
ACQUISITION STRATEGY
Enter New Geographic Markets. As part of its "hub-and-spoke" operating
strategy, the Company intends to acquire established, high-quality
companies in markets where it can establish a leading market position to
serve as core businesses into which additional operations may be
consolidated. The Company also intends to acquire transport businesses with
complementary transport routes and capabilities in markets across North
America in order to create an integrated national transport network and use
its regional towing operations as feeders for its transport services.
4
<PAGE>
Expand Within Existing Geographic Markets. Once the Company has
established a core presence in a market, it will seek to strengthen its
market position by acquiring additional large companies that offer similar
services. The Company will also pursue "tuck-in" acquisitions of smaller
companies, whose businesses can be integrated into the Company's
operations, thereby utilizing the Company's existing infrastructure over a
broader vehicle fleet and revenue base. In addition, the Company may seek
to vertically integrate its operations by acquiring companies which offer
complementary services that the Company does not currently offer.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered.................. 5,500,000 shares
Common Stock to be outstanding after
the
Offering............................. 11,076,101 shares (1)
Use of proceeds....................... To pay the cash portion of the purchase
price for the Founding Companies and for
general corporate purposes, including
working capital and future acquisitions.
See "Use of Proceeds."
Proposed Nasdaq National Market Sym-
bol.................................. URSI
</TABLE>
--------------------
(1) Includes 2,753,365 shares of Common Stock to be issued in connection
with the Acquisitions, but excludes 1,107,610 shares of Common Stock
reserved for issuance under the Company's stock option plan, 255,000 of
which will be subject to outstanding options upon consummation of the
Offering. See "Management--1998 Stock Option Plan."
United Road Services, Inc. was incorporated in July 1997 in Delaware. The
Company's executive offices are located at 8 Automation Lane, Albany, New
York 12205, and its telephone number is (518) 446-0140.
5
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
United Road Services will acquire the Founding Companies simultaneously with
and as a condition to consummation of the Offering. The following table
presents unaudited pro forma combined financial data for the Company, adjusted
to give effect to (i) the Acquisitions, (ii) certain pro forma adjustments to
the historical financial statements described below and (iii) consummation of
the Offering and the application of the net proceeds therefrom. The unaudited
pro forma combined income statement data assume that the Acquisitions and the
Offering were consummated on January 1, 1997 and are not necessarily indicative
of the results the Company would have obtained had these events actually
occurred on such date or of the Company's future results. See "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Unaudited Pro Forma Combined Financial
Statements of the Company and historical financial statements for certain of
the Founding Companies including, in each case, the Notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
PRO FORMA
COMBINED
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.............................................. $ 46,542
Cost of revenue.......................................... 33,264
----------
Gross profit............................................. 13,278
Selling, general and administrative expenses(1).......... 6,483
Goodwill amortization(2)................................. 1,306
----------
Income from operations................................... 5,489
Interest expense and other, net.......................... 336
----------
Income before income taxes............................... 5,153
Income tax expense(3).................................... 2,417
----------
Net income............................................... $ 2,736
==========
Net income per share..................................... $ 0.32
==========
Shares used in computing net income per share(4)......... 8,563,590
==========
</TABLE>
<TABLE>
<CAPTION>
AT
DECEMBER 31, 1997
----------------------
PRO FORMA AS
COMBINED ADJUSTED(5)
<S> <C> <C>
BALANCE SHEET DATA(6):
Working capital (deficit)........................ $(33,416)(7) $ 26,964
Total assets..................................... 76,016 104,306
Long-term obligations, excluding current
installments.................................... 7,090 7,090
Stockholders' equity............................. 27,063 87,693
</TABLE>
- --------------------
(1) Includes a $2.9 million reduction in salaries, bonuses and benefits to the
former owners of the Founding Companies to which they have contractually
agreed.
(2) Consists of amortization, over a 40-year estimated life, of goodwill to be
recorded as a result of the Acquisitions, which is non-deductible for tax
purposes.
(3) Assumes a corporate income tax rate of 38% and the non-deductibility of
goodwill.
(4) Includes (i) 2,604,000 shares issued to members of management of United
Road Services in connection with the formation of the Company, (ii) 218,736
shares issued to investors pursuant to subscription agreements, (iii)
2,753,365 shares issued to owners of the Founding Companies in connection
with the Acquisitions; and (iv) 2,987,489 of the shares to be issued in the
Offering, representing that portion of the total 5,500,000 shares to be
issued in the Offering necessary to pay the cash portion of the purchase
price for the Acquisitions and estimated Acquisition and Offering expenses.
(5) Adjusted for the sale of the 5,500,000 shares of Common Stock offered
hereby and the application of the estimated net proceeds therefrom. See "Use
of Proceeds."
(6) The unaudited pro forma combined balance sheet data assume that the
Acquisitions were consummated on December 31, 1997.
(7) Includes $32.3 million payable to owners of the Founding Companies,
representing the cash portion of the purchase price for the Acquisitions
considered to be paid from a portion of the net proceeds of the Offering.
6
<PAGE>
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
The following table presents summary income statement data for the Founding
Companies for each of their three most recent fiscal years. The historical
income statement data shown below do not give effect to the pro forma
adjustments related to contractually agreed upon reductions in salaries,
bonuses and benefits to the former owners of the Founding Companies, or any
other pro forma adjustments reflected in the Unaudited Pro Forma Combined
Financial Statements included elsewhere in this Prospectus. See "The Company,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements of the Founding Companies
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED(1)
----------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
NORTHLAND:
Net revenue........................................... $4,671 $6,353 $10,159
Income from operations................................ 324 346 1,438
FALCON:
Net revenue........................................... 4,352 6,203 7,785
Income (loss) from operations......................... (93) 374 215
QUALITY:
Net revenue........................................... 4,396 5,395 6,802
Income from operations................................ 380 986 1,564
CARON:
Net revenue........................................... 4,624 5,575 6,627
Income (loss) from operations......................... 341 253 (188)
ABSOLUTE:
Net revenue........................................... 3,601 3,465 4,780
Income (loss) from operations......................... 56 73 (82)
KEYSTONE:
Net revenue........................................... 2,968 3,369 3,943
Income from operations................................ 236 303 196
AUTO SERVICE:
Net revenue........................................... 2,352 2,874 3,310
Income from operations................................ 33 55 181
MILNE:
Net revenue........................................... 2,526 2,756 3,136
Income from operations................................ 32 233 144
</TABLE>
- --------------------
(1) The fiscal years presented are as follows: Quality--the fiscal years ended
January 31, 1996 and 1997 and the twelve-month period ended December 31, 1997;
Caron--the fiscal years ended September 30, 1995, 1996 and 1997; and Northland,
Falcon, Absolute, Keystone, Auto Service and Milne--the fiscal years ended
December 31.
7
<PAGE>
RISK FACTORS
The shares of Common Stock offered hereby involve a high degree of risk. The
following risk factors should be considered carefully in addition to the other
information in this Prospectus before purchasing the shares of Common Stock
offered hereby. Except for the historical information contained herein, the
discussion in this Prospectus contains certain forward-looking statements that
involve risks and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions. The cautionary statements made in
this Prospectus should be read as being applicable to all related forward-
looking statements wherever they appear in this Prospectus. The Company's
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include those discussed
below, as well as those discussed elsewhere herein.
ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATING FOUNDING COMPANIES
United Road Services was founded in July 1997 but has conducted no
operations and generated no revenues to date. United Road Services has entered
into definitive agreements to acquire the Founding Companies simultaneously
with and as a condition to consummation of the Offering. To date, the Founding
Companies have been operating as independent entities, and there can be no
assurance that the Company will be able to integrate the operations of these
businesses successfully or institute the necessary systems and procedures,
including accounting and financial reporting systems, to manage the combined
enterprise on a profitable basis. The Company's management group has been
assembled only recently, and there can be no assurance that the management
group will be able to manage the combined entity or to implement effectively
the Company's operating strategy and acquisition program. The Unaudited Pro
Forma Combined Financial Statements included herein cover periods when the
Founding Companies and United Road Services were not under common control or
management and may not be indicative of the Company's future financial or
operating results. The inability of the Company to integrate the Founding
Companies successfully would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Strategy" and "Management."
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company's strategy is to expand its operations significantly through the
acquisition of additional towing and transport service companies. There can be
no assurance that the Company will be able to identify, acquire or manage
profitably additional businesses or integrate successfully any acquired
businesses into the Company without substantial costs, delays or other
operational or financial problems. Further, acquisitions involve a number of
special risks, including failure of the acquired business to achieve expected
results, diversion of management's attention, failure to retain key personnel
of the acquired business and risks associated with unanticipated events or
liabilities, some or all of which could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
may consider acquiring complementary businesses that provide services that the
Company does not currently provide, and there can be no assurance that these
complementary businesses can be successfully integrated. In addition, there
can be no assurance that the Founding Companies or other companies to be
acquired in the future will achieve anticipated revenues and earnings. See
"Business--Strategy."
RISKS RELATED TO ACQUISITION FINANCING
The timing, size and success of the Company's future acquisition efforts and
the associated capital requirements cannot be predicted at this time. The
Company currently intends to finance future acquisitions by using a
combination of Common Stock, cash and debt. To the extent the Company issues
shares of Common Stock to finance future acquisitions, the interests of
existing stockholders will be diluted. If the Common Stock does not maintain a
sufficient market value, or if potential acquisition candidates are unwilling
to accept Common Stock as part of the consideration for the sale of their
businesses, the Company may be required to utilize more of its cash resources,
if available, in order to pursue its acquisition program. Upon consummation of
8
<PAGE>
the Offering and application of the proceeds therefrom, the Company expects to
have $28.0 million of net proceeds remaining for future acquisitions and
working capital. See "Use of Proceeds." If the Company does not have
sufficient cash resources, its growth could be limited unless it is able to
obtain additional capital through debt or equity financings. There can be no
assurance that the Company will be able to obtain the financing it will need
for its acquisition program on acceptable terms, or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Combined Liquidity and Capital Resources."
RISKS RELATED TO OPERATING STRATEGY
Key elements of the Company's strategy are to increase the revenue and to
improve the profitability of acquired companies. The Company intends to
increase revenue by continuing to provide high quality service and expanding
its scope of services offered and customer base. The Company's ability to
increase revenue will be affected by various factors, including demand for
towing and transport services, the level of competition, the Company's ability
to expand the range of services offered to existing customers, the Company's
ability to attract new customers and the Company's ability to attract and
retain a sufficient number of qualified personnel. The Company intends to seek
to improve profitability by various means, including a reduction of
duplicative operating costs and overhead, increased asset utilization and
increased purchasing power. The Company's ability to improve profitability
will be affected by various factors, including the costs associated with
centralizing its administrative functions, its ability to benefit from the
elimination of redundant operations, and its ability to benefit from enhanced
purchasing power. Many of these factors are beyond the control of the Company,
and there can be no assurance that the Company's operating strategy will be
successful. See "Business--Strategy."
MANAGEMENT OF GROWTH
The Company's strategy is to expand its operations through acquisitions and
internal growth. Management expects to spend significant time and resources in
evaluating, completing and integrating acquisitions. There can be no assurance
that the Company's systems, procedures and controls will be adequate to
support its operations as they expand. Any future growth will impose
significant added responsibilities on members of senior management, including
the need to recruit and integrate new senior level managers and executives.
There can be no assurance that such additional management will be successfully
recruited and retained by the Company. The Company's failure to manage its
growth effectively, or its inability to attract and retain additional
qualified management, could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON LAW ENFORCEMENT AGENCY RELATIONSHIPS
The Company provides services to a number of law enforcement agencies
pursuant to contracts, which typically have terms of five years or less, and
many of which are subject to competitive bidding upon expiration. There can be
no assurance that these contracts will be renewed upon expiration or that they
will be renewed on terms as favorable to the Company. With other law
enforcement agencies, there is no formal contract, and there can be no
assurance that a particular customer will continue to use the Company's
services or that such customer will not at some future time implement a
competitive bidding process for the provision of such services. See
"Business--Operations and Services Provided."
COMPETITION
The towing and transport service industry is highly fragmented and extremely
competitive. Competition for the delivery of towing and transport services is
based primarily on quality, service, timeliness, price and geographic
proximity. The Company competes with certain large towing and transport
service companies on a regional and local basis, some of which may have
greater financial and marketing resources than the Company. The Company also
competes with thousands of smaller local companies, which may have lower
overhead cost structures than the Company and may, therefore, be able to
provide their services at lower rates than the Company. The Company may also
face competition for acquisition candidates from companies which are
attempting, or may attempt in the future, to consolidate the towing and
transport service industry. Some of the
9
<PAGE>
Company's current or future competitors may be better positioned than the
Company to finance acquisitions, to pay higher prices for acquisition
candidates pursued by the Company or to finance their internal operations. See
"Business--Competition."
NEED FOR INTEGRATED INFORMATION TECHNOLOGY SYSTEMS
Due to the recent formation of the Company, each of the Founding Companies
is currently using the accounting, financial and dispatch systems that it has
in place. The Company is beginning the process of selecting and implementing
systems that will enable it to centralize its accounting and financial
reporting activities at its headquarters in Albany, New York. In addition, the
Company intends to explore the development of a national dispatch system for
its transport operations. The Company anticipates that it will need to upgrade
and expand its information technology systems on an ongoing basis as it
expands its operations and completes acquisitions. There can be no assurance
that the Company will not encounter unexpected delays and costs in connection
with implementing such systems or that such systems when installed will
function in accordance with the Company's expectations. See "Business--
Dispatch and Information Systems."
REGULATION
Towing and transport services are subject to various federal, state and
local laws and regulations regarding equipment, driver certification, training
and recordkeeping, and workplace safety. The Company's vehicles and facilities
are subject to periodic inspection by the United States Department of
Transportation and similar state and local agencies. The Company's failure to
comply with such laws and regulations could subject it to substantial fines
and could lead to the closure of operations that are not in compliance. In
addition, certain government contracting laws and regulations may impact the
Company's ability to acquire complementary businesses in a given city or
county. The Founding Companies have numerous federal, state and local licenses
and permits for the conduct of their respective businesses, which may or may
not be transferable to the Company upon consummation of the Acquisitions. To
the extent that such licenses and permits are not transferable, the Company
will be required to reapply for such licenses in order to conduct its
business. Any failure by the Company to obtain such licenses and permits or
delay in the Company's receipt of such licenses and permits could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Government Regulation and Environmental
Matters."
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
The Company's operations are subject to a number of federal, state and local
laws and regulations relating to the storage of petroleum products, hazardous
materials and impounded vehicles, as well as safety regulations relating to
the upkeep and maintenance of Company vehicles. In particular, the Company's
operations are subject to federal, state and local laws and regulations
governing leakage from salvage vehicles, waste disposal, the handling of
hazardous substances, environmental protection, remediation, workplace
exposure and other matters. It is possible that an environmental claim could
be made against the Company or any of the Founding Companies or that one or
more of them could be identified by the Environmental Protection Agency, a
state agency or one or more third parties as a potentially responsible party
under federal or state environmental laws. If the Company or any of the
Founding Companies were to be named a potentially responsible party, the
Company could be forced to incur substantial investigation, legal and
remediation costs, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Government Regulation and Environmental Matters."
POTENTIAL LIABILITIES ASSOCIATED WITH ACQUISITIONS
The Founding Companies or other companies to be acquired by the Company in
the future may have liabilities that the Company did not or may not discover
during its pre-acquisition due diligence investigations, including liabilities
arising from environmental contamination or non-compliance by prior owners
with environmental laws or regulatory requirements, and for which the Company,
as a successor owner or operator,
10
<PAGE>
may be responsible. The businesses acquired by the Company generally handle
and store petroleum and other hazardous substances at their facilities. In the
past, there may have been releases of these hazardous substances into the soil
or groundwater. The Company may be required under federal, state or local law
to investigate and remediate this contamination, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
LABOR RELATIONS
Although currently no employees of the Company are subject to collective
bargaining agreements, there can be no assurance that some employees of the
Company will not unionize in the future or that the Company will not acquire
companies with unionized employees. If employees of the Company were to
unionize or the Company were to acquire a company with unionized employees,
the Company could incur higher ongoing labor costs and could experience a
significant disruption of its operations in the event of a strike or other
work stoppage, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
LIABILITY AND INSURANCE
The Company is subject to various possible claims, including claims for
personal injury or death caused by accidents involving the Company's vehicles
and service personnel, workers' compensation and other employment related
claims. Although each of the Founding Companies has maintained its own
insurance, the Company expects to obtain insurance on a Company-wide basis,
subject to customary deductibles. Certain types of claims such as claims for
punitive damages or for damages arising from intentional misconduct, which are
often alleged in third-party lawsuits, may not be covered by the Company's
insurance. There can be no assurance that the Company will be able to maintain
adequate levels of insurance on reasonable terms in the future, if at all,
that existing or future claims will not exceed the level of the Company's
insurance, or that the Company will have sufficient capital available to pay
any uninsured claims.
QUARTERLY FLUCTUATIONS OF OPERATING RESULTS
The Company expects to experience significant fluctuations in quarterly
operating results due to a number of factors, including the timing of
acquisitions and related costs; the Company's success in integrating acquired
companies; the loss of significant customers or contracts; the timing of
expenditures for new equipment and the disposition of used equipment; price
changes in response to competitive factors; and general economic conditions.
As a result of these fluctuations, results for any one quarter should not be
relied upon as being indicative of performance in future quarters.
SEASONALITY
The towing and transport service industry is subject to seasonal variations.
Specifically, the demand for towing services is generally highest in extreme
weather, such as heat, cold, rain and snow. Consequently, the summer and
winter seasons tend to be the busiest times. Auto transport tends to be
strongest in the months with the mildest weather, since inclement weather
tends to slow the delivery of vehicles.
START-UP LOSSES
During the period from July 1997 (inception) through consummation of the
Offering and the Acquisitions, United Road Services will have incurred losses
because it had no revenues, yet it incurred costs relating to its
organization, search for acquisition candidates, and development of the
management team and infrastructure required to support its growth strategy and
manage its expanded operations. The Unaudited Pro Forma Combined Financial
Statements included elsewhere herein give effect to the Acquisitions, as more
fully described in the Notes to such statements. Such pro forma combined
results, however, are not necessarily indicative of the actual results of
operations that would have occurred had the Acquisitions occurred at the
beginning of the respective periods presented or of the results that may occur
in the future. There can be no assurance that the Company will achieve
profitability in the near term, if at all.
11
<PAGE>
RELIANCE ON KEY PERSONNEL
The Company is highly dependent upon its senior management team. The loss of
the service of any member of senior management may have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company does not presently maintain "key man" life insurance
with respect to members of senior management. In addition, the Company's
operating facilities are managed by regional and local managers who have an
average of 14 years of experience in the towing and transport service industry
and substantial knowledge of the local markets served, including former owners
and employees of the Founding Companies. The loss of one or more of these
managers may have a material adverse effect on the Company's business,
financial condition and results of operations in the event that the Company is
unable to find a suitable replacement in a timely manner.
The timely, professional and dependable service required by the towing and
transport service industry requires an adequate supply of skilled dispatchers,
drivers and support personnel. Accordingly, the Company's success will depend
on its ability to employ, train and retain the personnel necessary to meet the
Company's service requirements. From time to time, and in particular areas,
there are shortages of skilled personnel, and there can be no assurance that
the Company will be able to maintain an adequate skilled labor force necessary
to operate efficiently, that the Company's labor expenses will not increase as
a result of a shortage in the supply of skilled personnel or that the Company
will not have to curtail its planned growth as a result of labor shortages.
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following consummation of the Acquisitions and the Offering, the executive
officers and directors (including persons who have agreed to serve as
directors) of the Company and the former stockholders of the Founding
Companies, including their respective affiliates, will beneficially own
5,399,029 shares, or approximately 48.7%, of the outstanding Common Stock
(45.4% if the Underwriters' over-allotment option is exercised in full).
Accordingly, these persons, if acting in concert, will hold sufficient voting
power to enable them to significantly influence the election of all of the
directors and the outcome of all issues submitted to a vote of the
stockholders of the Company. Such concentration of ownership may have the
effect of delaying, deferring or preventing a change in control of the
Company, including transactions in which the holders of Common Stock might
receive a premium for their shares over prevailing market prices. See
"Principal Stockholders."
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES
Of the net proceeds of the Offering, $32.3 million, or approximately 53.3%,
will be utilized to pay the cash portion of the purchase price for the
Founding Companies, $16.8 million of which will be paid to individuals who
will become directors or executive officers of the Company or holders of more
than five percent of the Common Stock upon consummation of the Offering and
the Acquisitions. See "Use of Proceeds" and "Certain Transactions."
BENEFITS TO MANAGEMENT
Members of United Road Services' current management own in the aggregate
2,604,000 shares of Common Stock. These stockholders acquired their Common
Stock at a price of $0.03 per share. These parties will own, in the aggregate,
approximately 23.5% of the outstanding Common Stock following consummation of
the Offering and the Acquisitions, which will have a value of approximately
$25.0 million. See "Certain Transactions."
NO PRIOR PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE; STOCK PRICE
VOLATILITY
Prior to the Offering, there has been no public market for the Common Stock.
Therefore, the Offering Price for the Common Stock was determined by
negotiation between the Company and the Underwriters and may bear no
relationship to the price at which the Common Stock will trade after the
Offering. See "Underwriting" for
12
<PAGE>
the factors to be considered in determining the initial public offering price.
The Company has applied to have the Common Stock approved for listing on the
Nasdaq National Market. However, there can be no assurance that an active
trading market will develop subsequent to the Offering or, if developed, that
it will be sustained. After the Offering, the market price of the Common Stock
may be subject to significant fluctuations in response to numerous factors,
including the timing of any acquisitions by the Company, variations in the
Company's annual or quarterly financial results or those of its competitors,
the liquidity of the market for the Common Stock, investor perceptions of the
Company and the towing and transport service industry in general, changes by
financial research analysts in their estimates of the future earnings of the
Company, sales of significant amounts of Common Stock by existing holders,
loss of key personnel, conditions in the economy in general or in the
Company's industry in particular, unfavorable publicity, changes in applicable
laws and regulations and other factors. The market price of the Common Stock
may also be affected by the Company's ability to meet analyst expectations,
and the failure to meet such expectations, even if minor, could have a
material adverse effect on the market price of the Common Stock. In addition,
the stock market is subject to extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
these companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Any such litigation against the
Company could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
CERTAIN ANTI-TAKEOVER PROVISIONS
Upon consummation of the Offering, the Company's Board of Directors will
have the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock could have the effect of discouraging a third party from attempting to
acquire a majority of the outstanding voting stock of the Company. The Company
has no current plans to issue shares of Preferred Stock.
The Company's Amended and Restated Bylaws and indemnification agreements
provide that the Company will indemnify officers and directors against losses
they may incur in legal proceedings resulting from their service to the
Company. In addition, the Company's Amended and Restated Certificate of
Incorporation provides for a classified Board of Directors and limits the
ability of stockholders to (i) fill vacancies on the Board of Directors, (ii)
call special meetings of the stockholders, (iii) take action by written
consent or (iv) bring certain matters before a meeting of the stockholders
without prior notice to the Company. In addition, Section 203 of the Delaware
General Corporation Law restricts certain business combinations with any
"interested stockholder" as defined by such statute. These provisions are
designed to encourage potential buyers to negotiate with the Board of
Directors and give the Board sufficient opportunity to consider various
alternatives to maximize stockholder value. These provisions are also intended
to discourage certain tactics that may be used in proxy fights. However, each
of these provisions could discourage potential acquisition proposals and could
delay or prevent a change in control of the Company and, as a consequence, may
adversely affect the market price of the Common Stock. Such provisions also
may have the effect of preventing changes in the management of the Company.
See "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Acquisitions and the Offering, 11,076,101 shares of
Common Stock will be outstanding. The 5,500,000 shares of Common Stock offered
hereby (other than shares that may be purchased by affiliates of the Company)
will be freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"). The remaining
shares may not be resold except in
13
<PAGE>
transactions registered under the Securities Act, or pursuant to an available
exemption from registration. Each of the Company, its executive officers and
directors and certain stockholders of the Company has agreed, subject to
certain exceptions described below, not to (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common
Stock or (ii) enter into any swap or other arrangement that transfers all or a
portion of the economic consequences associated with the ownership of any
Common Stock (regardless of whether any of the transactions described in
clause (i) or (ii) is to be settled by the delivery of Common Stock, or such
other securities, in cash or otherwise) for a period of 180 days after the
date of this Prospectus without the prior written consent of Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJ") except for issuances of shares of
Common Stock by the Company in connection with future acquisitions. In
addition, certain executive officers of the Company and the stockholders of
the Founding Companies receiving Common Stock pursuant to the Acquisitions,
holding an aggregate of 5,387,125 shares of Common Stock, have agreed with the
Company not to sell, transfer or otherwise dispose of any of their shares of
Common Stock for a period of one year after the date of consummation of the
Offering.
The Company's existing stockholders have, and the stockholders of the
Founding Companies will receive, certain rights to include their shares in
registrations of Common Stock under the Securities Act that the Company
effects in the future (other than registrations in connection with future
acquisitions or employee benefit plans), including registrations that may
occur within one year after consummation of the Offering. Such stockholders
also have or will receive certain rights commencing two years after
consummation of the Offering to require the Company to effect a registration
of their shares of Common Stock. During the 180-day lockup period described
above, the Company has agreed not to file any registration statement with
respect to, and each of its executive officers, directors and certain
stockholders of the Company has agreed not to make any demand for, or exercise
any right with respect to, the registration of any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common
Stock without DLJ's prior written consent, except for the registration of
shares of Common Stock to be issued upon the exercise of stock options under
the Company's stock option plan. After consummation of the Offering, options
to purchase 255,000 shares of Common Stock will be outstanding and an
additional 852,610 shares of Common Stock will be reserved for issuance
pursuant to the Company's 1998 Stock Option Plan. The Company intends to
register under the Securities Act all of the shares of Common Stock underlying
such options. In addition, DLJ has agreed to allow the Company to register
5,000,000 shares of Common Stock under the Securities Act upon consummation of
the Offering for use by the Company in future acquisitions. These shares
generally will be freely tradeable after their issuance.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sale, will
have on the market price of the Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock in the market after the Offering
could adversely affect prevailing market prices for the Common Stock and could
adversely affect the trading price of such Common Stock and the Company's
ability to raise additional capital in the future. See "Shares Eligible for
Future Sale."
DILUTION
Upon consummation of the Offering, investors in the Offering will experience
immediate and substantial dilution in the pro forma combined net tangible book
value per share of their Common Stock of $8.80 from the Offering Price of
$12.00 per share. See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends and, for the foreseeable
future, intends to retain any future earnings for the development of its
business. See "Dividend Policy."
14
<PAGE>
THE COMPANY
United Road Services was formed in July 1997 to become a leading national
provider of motor vehicle and equipment towing and transport services.
Simultaneously with consummation of the Offering, United Road Services will
acquire the eight Founding Companies. The Founding Companies, which have been
in business for periods ranging from seven to 48 years, had combined net
revenue of approximately $46.5 million in 1997. The consideration to be paid
by the Company in connection with the Acquisitions consists of approximately
$32.3 million in cash, 2,753,365 shares of Common Stock and the assumption of
approximately $10.6 million in outstanding indebtedness of the Founding
Companies. The consideration for the Acquisitions was determined by
negotiations among United Road Services and representatives of the Founding
Companies. See "Certain Transactions." A brief description of each Founding
Company is set forth below.
NORTHLAND AUTO TRANSPORTERS INC. AND NORTHLAND FLEET LEASING, INC.
(COLLECTIVELY, "NORTHLAND") were founded in 1977 and 1992, respectively.
Northland's primary business is transporting vehicles for automobile auction
companies, leasing companies, automobile dealers, manufacturers and
individuals, primarily in the Midwestern United States. Northland has three
facilities in Detroit. It operates 55 vehicles, has 25 employees and 50
independent contractors, and had 1997 net revenue of $10.2 million. Upon
consummation of the Acquisitions, the Company expects to sign a three-year
employment agreement with Edward W. Morawski, the founder and President of
Northland, pursuant to which Mr. Morawski will continue to manage Northland.
In addition, Mr. Morawski will become a director of the Company upon
consummation of the Offering.
FALCON TOWING AND AUTO DELIVERY, INC. ("FALCON") was founded in 1983.
Falcon's primary business is transporting vehicles for automobile dealers,
leasing companies, automobile auction companies and long-haul transporters in
the Western United States. Falcon has facilities in Los Angeles, San Francisco
and Phoenix. It operates 49 vehicles, has 72 employees and had 1997 net
revenue of $7.8 million. Upon consummation of the Acquisitions, the Company
expects to sign a three-year employment agreement with David Floyd, the
founder and President of Falcon, pursuant to which Mr. Floyd will continue to
manage Falcon.
SMITH-CHRISTENSEN ENTERPRISES, INC. AND CITY TOWING, INC., EACH OF WHICH
CONDUCTS BUSINESS AS QUALITY TOWING (COLLECTIVELY "QUALITY") were founded in
1988 and 1968, respectively. Quality's primary business is towing, impounding
and storing vehicles for law enforcement agencies and commercial customers in
Southern Nevada. Quality also conducts lien sales of impounded vehicles.
Quality has two facilities in Las Vegas. It operates 40 vehicles, has 100
employees and had 1997 net revenue of $6.8 million. Edward D. Smith, the
President of Quality, will become a director of the Company upon consummation
of the Offering.
CARON AUTO WORKS, INC. AND CARON AUTO BROKERS, INC. (COLLECTIVELY, "CARON")
were founded in 1976. Caron's primary businesses are transporting vehicles for
leasing companies, long-haul transporters and individuals in the Northeastern
United States, and towing vehicles for commercial and private customers in the
Hartford, Connecticut region. Caron has two facilities in East Hartford and
facilities in New Jersey and Florida. It operates 55 vehicles, has 70
employees and 10 independent contractors, and had 1997 net revenue of $6.6
million. Upon consummation of the Acquisitions, the Company expects to sign a
five-year employment agreement and a five-year consulting agreement with David
Caron, the founder and President of Caron. Pursuant to these agreements, Mr.
Caron will continue to be involved in the management of Caron and will provide
acquisition-related consulting services to the Company.
ABSOLUTE TOWING AND TRANSPORTING, INC. ("ABSOLUTE") was founded in 1988.
Absolute's primary business is towing and transporting insurance salvage
vehicles for insurance companies and automobile auction companies in Southern
California. Absolute has one facility in Los Angeles. It operates 17 vehicles,
has 20 employees and 35 independent contractors, and had 1997 net revenue of
$4.8 million. Upon consummation of the Acquisitions, the Company expects to
sign a three-year consulting agreement with Todd Q. Smart, the founder and
President of Absolute, pursuant to which Mr. Smart will continue to be
involved in the management of Absolute and will provide acquisition-related
consulting services to the Company. Mr. Smart will also become a director of
the Company upon consummation of the Offering.
15
<PAGE>
KEYSTONE TOWING, INC. ("KEYSTONE") was founded in 1991. Keystone's primary
business is towing, impounding and storing vehicles for law enforcement
agencies and commercial customers in Southern California. Keystone also
conducts lien sales of impounded vehicles. Keystone has one facility in Los
Angeles. It operates 21 vehicles, has 34 employees and had 1997 net revenue of
$3.9 million. Upon consummation of the Acquisitions, the Company expects to
sign a three-year consulting agreement with Mark J. Henninger, the founder and
President of Keystone, pursuant to which Mr. Henninger will continue to be
involved in the management of Keystone and will provide acquisition-related
consulting services to the Company. Mr. Henninger will also become a director
of the Company upon consummation of the Offering.
ASC TRANSPORTATION SERVICES AND AUTO SERVICE CENTER, EACH OF WHICH CONDUCTS
BUSINESS AS ASC TRUCK SERVICE (COLLECTIVELY, "AUTO SERVICE") was founded in
1956. Auto Service's primary business is towing vehicles for commercial and
individual customers in the Sacramento, California region. Auto Service has
two facilities in Sacramento. It operates 20 vehicles, has 48 employees and
had 1997 net revenue of $3.3 million. Upon consummation of the Acquisitions,
the Company expects to sign a three-year employment agreement with Robert
Boxwell, President of Auto Service, pursuant to which Mr. Boxwell will
continue to manage Auto Service.
SILVER STATE TOW & RECOVERY, INC., WHICH CONDUCTS BUSINESS AS MILNE TOW &
TRANSPORT SERVICE ("MILNE") was founded in 1950. Milne's primary business is
towing vehicles and transporting heavy construction equipment for commercial
customers throughout Northern Nevada. Milne has one facility in Reno. It
operates 35 vehicles, has 50 employees and had 1997 net revenue of $3.1
million. Upon consummation of the Acquisitions, the Company expects to sign a
two-year consulting agreement with Gene Temen, the founder and President of
Milne, pursuant to which Mr. Temen will continue to be involved in the
management of Milne and will provide acquisition-related consulting services
to the Company.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 5,500,000 shares of
Common Stock offered hereby are estimated to be approximately $60.6 million
($69.8 million if the Underwriters' over-allotment option is exercised in
full), assuming an Offering Price of $12.00 per share and after deducting
estimated underwriting discounts and commissions and Offering expenses. Of
this amount, approximately $32.3 million will be used to pay the cash portion
of the purchase price for the Founding Companies and approximately $250,000
will be used to pay expenses incurred in connection with the Acquisitions.
The remaining net proceeds will be used for general corporate purposes,
which are expected to include working capital and future acquisitions. Pending
the foregoing uses, the proceeds will be invested in short-term, investment-
grade, interest-bearing securities. While the Company continuously considers
possible acquisition prospects as part of its growth strategy, the Company
presently has no agreements, arrangements or other understandings to acquire
any companies other than the Founding Companies.
DIVIDEND POLICY
The Company has never paid any cash dividends and intends, for the
foreseeable future, to retain any future earnings for the development of its
business. The Company's future dividend policy will be determined by its Board
of Directors on the basis of various factors, including the Company's results
of operations, financial condition, capital requirements and investment
opportunities.
17
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1997, (i) the actual
capitalization of United Road Services, (ii) the capitalization of the Company
on a pro forma combined basis to give effect to the Acquisitions and (iii) the
capitalization of the Company on a pro forma combined basis, as adjusted to
give effect to the Acquisitions and the Offering and application of the
estimated net proceeds therefrom. This table should be read in conjunction
with the Unaudited Pro Forma Combined Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
-------------------------------
PRO FORMA AS
ACTUAL COMBINED ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term obligations, including current in-
stallments..................................... $ 92 $35,973(1) $ 3,633
===== ======= =======
Long-term obligations, excluding current in-
stallments..................................... -- $ 7,090 $ 7,090
----- ------- -------
Stockholders' equity:
Common stock, $0.001 par value, 35,000,000
shares authorized; 2,604,000 shares issued and
outstanding actual; 5,576,101 shares issued and
outstanding pro forma combined; and 11,076,101
shares issued and outstanding as adjusted (2).. 3 6 11
Additional paid-in capital...................... 67 27,231 87,856
Retained earnings (deficit)..................... (174) (174) (174)
----- ------- -------
Total stockholders' equity (deficit).......... (104) 27,063 87,693
----- ------- -------
Total capitalization.......................... $(104) $34,153 $94,783
===== ======= =======
</TABLE>
- ---------------------
(1) Includes $32.3 million payable to the owners of the Founding Companies,
representing the cash portion of the purchase price for the Acquisitions
considered to be paid from a portion of the net proceeds of the Offering.
(2) Excludes 255,000 shares of Common Stock issuable upon exercise of stock
options to be outstanding upon consummation of the Offering.
18
<PAGE>
DILUTION
The deficit in pro forma combined net tangible book value of the Company as
of December 31, 1997 was $24.9 million or $4.47 per share of Common Stock
after giving effect to the Acquisitions. "Pro forma combined net tangible book
value" per share represents the amount of total tangible assets of the Company
reduced by its total liabilities and divided by the total number of shares of
Common Stock outstanding after giving effect to the Acquisitions and the
issuance of 218,736 shares of Common Stock in January 1998. After giving
effect to the sale of the 5,500,000 shares of Common Stock offered hereby, and
after deducting estimated underwriting discounts and commissions and Offering
expenses, pro forma combined net tangible book value of the Company at
December 31, 1997 would have been $35.5 million or $3.20 per share. This
represents an immediate increase in pro forma combined net tangible book value
of $7.67 per share to existing stockholders and an immediate dilution of $8.80
per share to new investors in the Offering (the "New Investors"). The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........... $12.00
Pro forma combined deficit in net tangible book value
per share before the Offering.......................... $(4.47)
Increase attributable to New Investors.................. 7.67
------
Pro forma net tangible book value per share after the Of-
fering................................................... 3.20
------
Dilution per share to New Investors....................... $ 8.80
======
</TABLE>
The following table sets forth, as of December 31, 1997, on a pro forma
combined basis after giving effect to the Acquisitions, the issuance of
218,736 shares of Common Stock in January 1998 and the Offering, the number of
shares of Common Stock purchased from the Company, the total consideration
paid and the average price per share paid by existing stockholders and the New
Investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 5,576,101 50.3% $(26,513)(1) (67.1)% $(4.75)
New Investors.............. 5,500,000 49.7 66,000 167.1 12.00
---------- ----- -------- ------
Total.................... 11,076,101 100.0% $ 39,487 100.0 %
========== ===== ======== ======
</TABLE>
- ---------------------
(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the Founding Companies before pro forma
adjustments, reduced by the cash portion of the consideration payable to
the owners of the Founding Companies in connection with the Acquisitions.
19
<PAGE>
SELECTED FINANCIAL DATA
United Road Services will acquire the Founding Companies simultaneously
with, and as a condition to, the consummation of the Offering. The following
selected historical financial data for United Road Services as of December 31,
1997 and for the period from July 25, 1997 (inception) to December 31, 1997
have been derived from the audited financial statements of United Road
Services. The following selected unaudited pro forma combined financial data
presents certain information for the Company, adjusted for (i) the
Acquisitions, (ii) the effects of certain pro forma adjustments to the
historical financial statements and (iii) consummation of the Offering and the
application of the net proceeds therefrom. The unaudited pro forma combined
income statement data assume that the Acquisitions and the Offering were
consummated on January 1, 1997 and are not necessarily indicative of the
results the Company would have obtained had these events actually occurred on
such date or of the Company's future results. For financial statement
presentation purposes, Northland has been designated the predecessor entity of
the Company. The following selected historical financial data for Northland as
of December 31, 1996 and 1997 and for each of the years in the three-year
period ended December 31, 1997 have been derived from the audited financial
statements of Northland. The following selected financial data is qualified by
reference to, and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
Unaudited Pro Forma Combined Financial Statements of the Company and
historical financial statements for certain of the Founding Companies
including, in each case, the Notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
JULY 25, 1997 DECEMBER 31, 1997
(INCEPTION) TO PRO FORMA
DECEMBER 31, 1997 COMBINED
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA--UNITED ROAD
SERVICES:
Net revenue................................ $ -- $ 46,542
Cost of revenue............................ -- 33,264
--------- ---------
Gross profit............................... -- 13,278
Selling, general and administrative
expenses.................................. 174 6,483(1)
Goodwill amortization...................... -- 1,306(2)
--------- ---------
Income (loss) from operations.............. (174) 5,489
Interest expense and other, net............ -- 336
--------- ---------
Income (loss) before income tax............ (174) 5,153
Income tax expense......................... -- 2,417(3)
--------- ---------
Net income (loss).......................... $ (174) $ 2,736
========= =========
Net income (loss) per share................ $ (0.08) $ 0.32
========= =========
Shares used in computing net income (loss)
per share................................. 2,055,300(4) 8,563,590(5)
========= =========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
-------------------------------------
PRO FORMA AS
ACTUAL COMBINED(6) ADJUSTED(6)(7)
(IN
THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA--UNITED ROAD SERVICES:
Working capital (deficit).................. $(104) $(33,416)(8) $ 26,964
Total assets............................... 50 76,016 104,306
Long-term obligations, excluding current
installments.............................. -- 7,090 7,090
Stockholders' equity (deficit)............. (104) 27,063 87,693
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------
1993 1994 1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF OPERATIONS
DATA--NORTHLAND:
Net revenue....................... $4,736 $3,769 $4,671 $6,353 $10,159
Operating income (loss)........... (128) (44) 324 346 1,438
Other income (expense), net....... 199 117 (18) (1) (49)
Net income........................ 71 67 275 346 1,054
<CAPTION>
AT DECEMBER 31
---------------------------------------
1993 1994 1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA--
NORTHLAND:
Working capital................... $ 387 $ 52 $ 375 $ 235 $ 399
Total assets...................... 1,193 2,368 2,653 3,268 5,465
Long-term obligations, excluding
current installments............. 60 205 257 331 1,074
Stockholders' equity.............. 815 1,369 1,645 1,991 3,045
</TABLE>
- ---------------------
(1) Includes a $2.9 million reduction in salaries, bonuses and benefits to the
former owners of the Founding Companies to which they have contractually
agreed.
(2) Consists of amortization, over a 40-year estimated life, of goodwill to be
recorded as a result of the Acquisitions, which is non-deductible for tax
purposes.
(3) Assumes a corporate income tax rate of 38% and the non-deductibility of
goodwill.
(4) Represents the actual weighted average outstanding shares.
(5) Includes (i) 2,604,000 shares issued to members of management of United
Road Services in connection with the formation of the Company, (ii)
218,736 shares issued to investors pursuant to subscription agreements,
(iii) 2,753,365 shares issued to owners of the Founding Companies in
connection with the Acquisitions; and (iv) 2,987,489 of the shares to be
issued in the Offering, representing that portion of the total 5,500,000
shares to be issued in the Offering necessary to pay the cash portion of
the purchase price for the Acquisitions and estimated Acquisition and
Offering expenses.
(6) The unaudited pro forma combined balance sheet data assume that the
Acquisitions were consummated on December 31, 1997.
(7) Adjusted for the sale of the 5,500,000 shares of Common Stock offered
hereby and the application of the net proceeds therefrom. See "Use of
Proceeds" and "Certain Transactions."
(8) Includes $32.3 million payable to owners of the Founding Companies,
representing the cash portion of the purchase price for the Acquisitions
considered to be paid from a portion of the net proceeds of the Offering.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis should be read in conjunction with the
Founding Companies' Financial Statements and the respective Notes thereto, and
"Selected Financial Data" appearing elsewhere in this Prospectus. Except for
the historical information contained herein, the discussion in this Prospectus
contains forward-looking statements that involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus. The Company's actual results could differ materially from
those discussed herein. Factors that could cause or contribute to such
differences include those discussed in "Risk Factors," as well as those
discussed elsewhere herein.
INTRODUCTION
The Company's net revenue is derived from providing a broad range of towing
and transport services. The services offered by the Company include towing,
impounding and storing motor vehicles, conducting lien sales and auctions of
abandoned vehicles, and transporting new and used vehicles, insurance salvage
vehicles and heavy construction equipment. The Company's customers include
commercial entities such as automobile leasing companies, insurance companies,
automobile auction companies, automobile dealers, repair shops and fleet
operators; law enforcement agencies, such as police, sheriff and highway
patrol departments; and individual motorists.
The Company derives revenue from: towing and transport services based on
distance, time or fixed charges and from impounding and storage services based
on daily fees. If an impounded vehicle is not collected within a period
prescribed by law (typically between 30 and 90 days), the Company completes
lien proceedings and sells the vehicle at auction or to a scrap metal
facility, depending on the value of the vehicle. Depending on the
jurisdiction, the Company either may keep all of the proceeds from vehicle
sales, or may keep the proceeds up to the amount of accrued towing and storage
fees and remit the remainder to the law enforcement agency. These services are
in some cases provided under contracts with police, sheriff and highway patrol
departments. In other cases, the Company provides these services to law
enforcement agencies without a long-term contract. Prices charged by the
Company for law enforcement towing and storage of impounded vehicles are
limited by contractual provisions or local regulation.
Costs of revenue consist primarily of salaries and benefits of drivers,
dispatchers, supervisory and other employees, subcontracted services, fuel,
depreciation, repairs and maintenance, insurance, parts and supplies, other
vehicle expenses, and equipment rentals. Selling, general and administrative
expenses consist primarily of compensation and benefits to owners as well as
to sales and administrative employees, fees for professional services,
depreciation of office equipment, advertising and other general office
expenses.
In the case of law enforcement and private impound towing, the Company is
paid by the owner of the impounded vehicle when the owner claims the vehicle
or is paid from the proceeds of lien sales or auctions. With respect to the
Company's other operations, customers are billed upon completion of the
Company's services, with payment due within 30 days. Towing revenue is
recognized at the completion of each towing engagement, storage fees are
accrued over the period the vehicles are held in the impound facility,
transport revenue is recognized upon the delivery of the vehicle or equipment
to its final destination, and revenue from auction sales is recorded when
title to the vehicles has been transferred. Expenses related to the generation
of revenue are recognized as incurred.
The Founding Companies have operated throughout the periods presented as
independent, privately owned entities, and their results of operations reflect
different tax structures (S Corporations or C Corporations) which have
influenced the historical level of owner compensation. Gross profit margins
and selling, general and administrative expenses as a percentage of net
revenue may not be comparable among the individual Founding
22
<PAGE>
Companies. The owners of the Founding Companies have agreed to certain
reductions in their compensation and benefits in connection with the
Acquisitions. The aggregate amount of such reductions, had they been in effect
in 1997, is $2.9 million, which has been reflected as an adjustment in the
Unaudited Pro Forma Combined Statement of Operations (the "Compensation
Differential").
The Company anticipates that following the Acquisitions it may realize
savings from (i) consolidation of insurance and employee benefit programs;
(ii) the Company's ability to borrow at lower interest rates than the Founding
Companies; (iii) centralization of other general and administrative functions
such as finance, training and advertising; and (iv) greater volume discounts
from providers of fuel, equipment, parts, and other supplies. It is
anticipated that these savings will be offset by costs related to the
Company's new corporate management and by the costs associated with being a
public company. Certain of these costs will include the establishment of a new
integrated information system that the Company expects will be calendar year
2000 compatible. The Company believes that neither these savings nor the costs
associated therewith can be quantified because the Acquisitions have not
occurred, and there have been no combined operating results upon which to base
any assumptions. As a result, they have not been included in the financial
information included herein.
The Acquisitions will be accounted for using the purchase method of
accounting. United Road Services has been designated as the "accounting
acquirer" in the Acquisitions. Accordingly, the excess of the fair value of
the consideration paid in the Acquisitions over the fair value of the net
assets acquired by United Road Services from the Founding Companies, $52.0
million, will be recorded as "goodwill." This goodwill will be amortized over
its estimated useful life of 40 years as a non-cash charge to operating
income. The amount of goodwill to be
recorded and the related amortization expense will depend in part on the
actual Offering price. See "Certain Transactions--Organization of the
Company."
COMBINED RESULTS OF OPERATIONS
The combined results of operations of the Founding Companies for the periods
presented do not represent combined results of operations presented in
accordance with generally accepted accounting principles, but are only a
summation of the net revenue, cost of revenue and selling, general and
administrative expenses of the individual Founding Companies on a historical
basis. The combined results also exclude the effect of adjustments and may not
be comparable to, and may not be indicative of, the Company's post-combination
results of operations because (i) the Founding Companies were not under common
control or management during the periods presented; (ii) the Founding
Companies used different tax structures (S Corporations or C Corporations)
during the periods presented; (iii) the Company will incur incremental costs
related to its new corporate management and the costs attributable to being a
public company; (iv) the Company will use the purchase method of accounting to
record the Acquisitions, resulting in goodwill which will be amortized over 40
years; and (v) the combined results of operations data do not reflect the
Compensation Differential and the potential cost savings, synergies and
efficiencies that may be achieved through the integration of the operations of
the Founding Companies.
The following table sets forth, for the years indicated, certain unaudited
combined results of operations data, and such data as a percentage of combined
net revenue, of the Founding Companies:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue....................... $29,489 100.0% $35,990 100.0% $46,542 100.0%
Cost of revenue................... 22,097 74.9 26,899 74.7 33,865 72.8
------- ----- ------- ----- ------- -----
Gross profit...................... 7,392 25.1 9,091 25.3 12,677 27.2
Selling, general and
administrative expenses.......... 6,081 20.6 6,468 18.0 9,385 20.1
------- ----- ------- ----- ------- -----
Income from operations............ $1,311 4.5% $ 2,623 7.3% $ 3,292 7.1%
======= ===== ======= ===== ======= =====
</TABLE>
23
<PAGE>
Combined Results of Operations for 1997 Compared to 1996
Net Revenue. Net revenue increased $10.5 million, or 29.3%, from $36.0
million in 1996 to $46.5 million in 1997. The increase in net revenue was
primarily attributable to continued growth in demand for the towing and
transport of vehicles resulting from (i) an increase in the volume of
automobiles on the road, (ii) relocation of vehicles upon completion of lease
programs, (iii) growth of the population in the geographical service areas of
certain of the Founding Companies and (iv) increased enforcement of government
mandates regarding unlicensed or uninsured drivers. All of the Founding
Companies reported an increase in net revenue from 1996 to 1997, ranging from
13.8% at Milne to 59.9% at Northland. The largest net revenue increases were
at Northland, Quality and Falcon.
Gross Profit. Gross profit increased $3.6 million, or 39.5%, from $9.1
million in 1996 to $12.7 million in 1997, due principally to increases in
gross profit of $1.6 million at Northland, $773,000 at Quality and $305,000 at
Absolute. As a percentage of net revenue, gross profit increased from 25.3% in
1996 to 27.2% in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.9 million, or 45.1%, from $6.5 million in
1996 to $9.4 million in 1997. Selling, general and administrative expenses as
a percentage of net revenue increased from 18.0% in 1996 to 20.1% in 1997.
This increase was primarily attributable to an increase in stockholder
compensation and the continued expansion of administrative staff to support
revenue growth.
Combined Results of Operations for 1996 Compared to 1995
Net Revenue. Net revenue increased approximately $6.5 million, or 22.0%,
from $29.5 million in 1995 to $36.0 million in 1996. The increase in net
revenue was primarily attributable to the increased demand for the transport
of vehicles as a result of an increase in the volume of automobiles on the
road, the relocation of vehicles upon completion of lease programs and the
overall growth of the population in certain of the Founding Companies'
geographical service areas. All of the Founding Companies, except Absolute,
reported an increase in net revenue from 1995 to 1996, with increases ranging
from 9.1% at Milne to 42.5% at Falcon. The largest net revenue increases were
at Northland, Falcon and Quality.
Gross Profit. Gross profit increased $1.7 million, or 23.0%, from $7.4
million in 1995 to $9.1 million in 1996. Gross profit as a percentage of net
revenue increased from 25.1% in 1995 to 25.3% in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $387,000, or 6.4%, from $6.1 million in 1995
to $6.5 million in 1996. As a percentage of net revenue, selling, general and
administrative expenses decreased from 20.6% in 1995 to 18.0% in 1996.
Combined Liquidity and Capital Resources
Upon consummation of the Acquisitions and application of the estimated net
proceeds therefrom, the Company anticipates that, on a pro forma basis, it
will have up to approximately $29.7 million of cash and cash equivalents,
$27.0 million of working capital and $10.7 million of outstanding
indebtedness. See "Use of Proceeds."
The Founding Companies generated $3.0 million of net cash from operating
activities during 1997, primarily at Northland, Quality and Falcon. Net cash
used in investing activities was $2.6 million, primarily relating to equipment
purchases. Net cash used in financing activities was $217,000 million,
consisting of reductions in long-term debt and capital lease obligations of
$1.9 million, distributions to stockholders of $295,000, offset by new
financing of $1.9 million. At December 31, 1997, the Founding Companies had a
working capital deficiency of $1.7 million and total debt (including debt to
stockholders) and capital lease obligations of $7.3 million and $3.4 million,
respectively. This was primarily a reflection of stockholder distributions and
the acquisition of capital lease obligations during 1997.
24
<PAGE>
The Company expects to obtain a $50.0 million revolving line of credit from
Bank of America. The facility is expected to be used for acquisitions, capital
expenditures, refinancing of outstanding debt and for general corporate
purposes. The credit facility will require the Company to comply with various
loan covenants including (i) maintenance of certain financial ratios, (ii)
restrictions on additional indebtedness, and (iii) restrictions on liens,
guarantees, advances and dividends. The line of credit will be subject to
customary drawing conditions and consummation of the Offering.
The Company intends to pursue acquisition opportunities. The Company expects
to fund future acquisitions through the issuance of additional Common Stock,
borrowings, including use of amounts available under the proposed credit
facility and cash flow from operations. On a combined basis, the Founding
Companies made capital expenditures of $3.3 million in 1997.
NORTHLAND COMBINED RESULTS OF OPERATIONS
Northland's primary business is transporting vehicles for automobile auction
companies, leasing companies, automobile dealers, manufacturers and
individuals, primarily in the Midwestern United States. Northland has three
facilities in Detroit. It operates 55 vehicles and has 25 employees and 50
independent contractors.
The following table sets forth selected combined statement of operations
data, and such data as a percentage of net revenue, for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997
------------ ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue......................... $4,671 100.0% $6,353 100.0% $10,159 100.0%
Cost of revenue..................... 3,683 78.8 5,132 80.8 7,342 72.3
------ ----- ------ ----- ------- -----
Gross profit........................ 988 21.2 1,221 19.2 2,817 27.7
Selling, general and administrative
expenses........................... 664 14.2 875 13.8 1,379 13.5
------ ----- ------ ----- ------- -----
Income from operations.............. $ 324 7.0% $ 346 5.4% $ 1,438 14.2%
====== ===== ====== ===== ======= =====
</TABLE>
Northland Results for 1997 Compared to 1996
Net Revenue. Net revenue increased $3.8 million, or 59.9%, from $6.4 million
in 1996 to $10.2 million in 1997, primarily due to the full year impact of a
service arrangement with a national provider of automobile lease financing and
increased volume from previously existing service arrangements.
Gross Profit. Gross profit increased $1.6 million, or 130.8%, from $1.2
million in 1996 to $2.8 million in 1997. As a percentage of net revenue, gross
profit increased from 19.2% in 1996 to 27.7% in 1997. These increases were due
primarily to the increased volume of business and increased efficiencies
resulting from establishing variable subcontractor and broker arrangements to
service this additional volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $504,000, or 57.7%, from $875,000 in 1996 to
$1.4 million in 1997, primarily due to increased officer and office personnel
compensation, which was related to the increase in net revenue. As a
percentage of net revenue, selling, general and administrative expenses
decreased from 13.8% in 1996 to 13.5% in 1997.
Northland Results for 1996 Compared to 1995
Net Revenue. Net revenue increased $1.7 million, or 36.0%, from $4.7 million
in 1995 to $6.4 million in 1996, primarily due to the addition of new service
arrangements resulting from the growth of the automobile leasing industry and
relating to the transport of vehicles coming off lease programs.
25
<PAGE>
Gross Profit. Gross profit increased $232,000, or 23.5%, from $988,000 in
1995 to $1.2 million in 1996. As a percentage of net revenue, gross profit
decreased from 21.2% in 1995 to 19.2% in 1996. The decrease as a percentage of
net revenue was primarily due to increased depreciation and increased repair,
maintenance and equipment rental expense, without a proportional increase in
net revenue.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $211,000, or 31.8%, from $664,000 in 1995 to
$875,000 in 1996, but as a percentage of net revenue decreased from 14.2% in
1995 to 13.8% in 1996.
Northland Liquidity and Capital Resources
At December 31, 1997, working capital was $399,000 and debt and capital
lease obligations outstanding were $681,000 and $941,000, respectively.
Northland generated $1.0 million in net cash from operating activities in
1997. Net cash used in investing activities was $665,000, which was primarily
for equipment purchases. Net cash used in financing activities consisted of
$398,000 relating to principal payments on debt and capital leases
outstanding.
FALCON RESULTS OF OPERATIONS
Falcon's primary business is transporting vehicles for automobile dealers,
leasing companies, automobile auction companies and long-haul transporters in
the Western United States. Falcon has facilities in Los Angeles, San Francisco
and Phoenix. It operates 49 vehicles and has 72 employees.
The following table sets forth selected statement of operations data, and
such data as a percentage of net revenue, for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue........................ $4,351 100.0% $6,203 100.0% $7,785 100.0%
Cost of revenue.................... 3,492 80.2 4,638 74.8 5,956 76.5
------ ----- ------ ----- ------ -----
Gross profit....................... 859 19.8 1,565 25.2 1,829 23.5
Selling, general and administrative
expenses.......................... 952 21.9 1,191 19.2 1,614 20.7
------ ----- ------ ----- ------ -----
Income (loss) from operations...... $ (93) (2.1)% $ 374 6.0% $ 215 2.8%
====== ===== ====== ===== ====== =====
</TABLE>
Falcon Results for 1997 Compared to 1996
Net Revenue. Net revenue increased $1.6 million, or 25.5%, from $6.2 million
in 1996 to $7.8 million in 1997. The growth in revenue was primarily due to
increased volume driven by recent fleet expansion.
Gross Profit. Gross profit increased $264,000, or 16.9%, from $1.6 million
in 1996 to $1.8 million in 1997. As a percentage of net revenue, gross profit
decreased from 25.2% in 1996 to 23.5% in 1997. This decrease as a percentage
of net revenue was the result of increased depreciation, facility and
equipment rental expense and insurance premiums.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $423,000, or 35.6%, from $1.2 million in
1996 to $1.6 million in 1997. As a percentage of net revenue, selling, general
and administrative expenses increased from 19.2% in 1996 to 20.7% in 1997.
These increases were primarily due to increased officer and office personnel
compensation, which was related to an increase in net revenue.
26
<PAGE>
Falcon Results for 1996 Compared to 1995
Net Revenue. Net revenue increased $1.9 million, or 42.5%, from $4.4 million
in 1995 to $6.2 million in 1996. This increase was primarily due to the
opening of an additional location in each of 1994 and 1995.
Gross Profit. Gross profit increased $705,000, or 82.0%, from $860,000 in
1995 to $1.6 million in 1996. As a percentage of net revenue, gross profit
increased from 19.8% in 1995 to 25.2% in 1996. These increases were generally
attributable to an increase in revenues from additional locations for which
the start-up costs had been incurred in prior years.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $239,000, or 25.0%, from $952,000 in 1995 to
$1.2 million in 1996. As a percentage of net revenue, selling, general and
administrative expenses decreased from 21.9% in 1995 to 19.2% in 1996. The
decrease as a percentage of net revenue was the result of an increase in
revenue without a corresponding increase in overhead.
Falcon Liquidity and Capital Resources
At December 31, 1997, working capital deficiency was $838,000. Debt and
capital lease obligations outstanding were $561,000 and $1.1 million,
respectively.
Falcon generated $892,000 in net cash from operating activities in 1997. Net
cash used in investing activities was $778,000, which was related to the
purchase and sale of various equipment. Net cash used in financing activities
was $134,000 consisting of payments on capital lease obligations, partially
offset by proceeds from long term debt.
QUALITY CONSOLIDATED RESULTS OF OPERATIONS
Quality's primary business is towing, impounding and storing vehicles for
law enforcement agencies and commercial customers in Southern Nevada. Quality
also conducts lien sales of impounded vehicles. Quality has two facilities in
Las Vegas. It operates 40 vehicles and has 100 employees.
The following table sets forth selected consolidated statement of operations
data, and such data as a percentage of net revenue, for the periods indicated:
<TABLE>
<CAPTION>
TWELVE-MONTH
PERIOD ENDED
YEARS ENDED JANUARY 31, DECEMBER 31, 1997(1)
-------------------------- --------------------
1996 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue.................. $4,396 100.0% $5,395 100.0% $ 6,802 100.0%
Cost of revenue.............. 2,579 58.7 3,214 59.6 3,849 56.6
------ ----- ------ ----- ---------- ---------
Gross profit................. 1,817 41.3 2,181 40.4 2,953 43.4
Selling, general and
administrative expenses..... 1,437 32.7 1,195 22.2 1,390 20.4
------ ----- ------ ----- ---------- ---------
Income from operations....... $ 380 8.6% $ 986 18.2% $ 1,563 23.0%
====== ===== ====== ===== ========== =========
</TABLE>
- ---------------------
(1) Quality has a fiscal year end of January 31. The twelve-month period ended
December 31, 1997 includes the results of operations for the month of
January 1997, which are also included in the fiscal year ended January 31,
1997.
Quality Results for Twelve-Month Period Ended December 31, 1997 Compared to
Year Ended January 31, 1997
Net Revenue. Net revenue increased $1.4 million, or 26.1%, from $5.4 million
in the year ended January 31, 1997 to $6.8 million in the twelve-month period
ended December 31, 1997. The increase was due primarily to a rate increase
effected in 1997, and increased service calls arising from the continued
expansion of the population within the geographical service area.
27
<PAGE>
Gross Profit. Gross profit increased $773,000, or 35.4%, from $2.2 million
in the year ended January 31, 1997 to $3.0 million in the twelve-month period
ended December 31, 1997. As a percentage of net revenue, gross profit
increased from 40.4% in the year ended January 31, 1997 to 43.4% in the
twelve-month period ended December 31, 1997. These increases were generally
attributable to increased volume of business that helped to facilitate
favorable economies of scale.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $195,000, or 16.3%, from $1.2 million in the
year ended January 31, 1997 to $1.4 million in the twelve-month period ended
December 31, 1997. As a percentage of net revenue, selling, general and
administrative expenses decreased from 22.2% in the year ended January 31,
1997 to 20.4% in the twelve-month period ended December 31, 1997.
Quality Results for Year Ended January 31, 1997 Compared to Year Ended
January 31, 1996
Net Revenue. Net revenue increased $1.0 million, or 22.7%, from $4.4 million
in 1996 to $5.4 million in 1997. This increase was related primarily to
increased service calls arising from the expansion of the population within
the geographical service area and a rate increase effected in 1996.
Gross Profit. Gross profit increased $364,000, or 20.1%, from $1.8 million
in 1996 to $2.2 million in 1997. As a percentage of net revenue, gross profit
decreased from 41.3% in 1996 to 40.4% in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $242,000, or 16.8%, from $1.4 million in
1996 to $1.2 million in 1997. As a percentage of net revenue, selling, general
and administrative expenses decreased from 32.7% in 1996 to 22.2% in 1997. The
decrease as a percentage of net revenue was the result of an increase in
revenue without a corresponding increase in overhead.
Quality Liquidity and Capital Resources
At December 31, 1997, working capital deficiency was $397,000 and debt
obligations outstanding were $2.7 million.
Quality generated $692,000 in net cash from operating activities in 1997.
Net cash used in investing activities was approximately $473,000, which was
related to the purchase of various equipment. Net cash used in financing
activities was approximately $133,000, consisting primarily of payments on
debt obligations.
CARON COMBINED RESULTS OF OPERATIONS
Caron's primary businesses are transporting vehicles for leasing companies,
long-haul transporters and individuals in the Northeastern United States, and
towing vehicles for commercial and private customers in the Hartford,
Connecticut region. Caron has facilities in East Hartford, New Jersey and
Florida. Caron operates 55 vehicles and has 70 employees and 10 independent
contractors.
The following table sets forth selected combined statement of operations
data, and such data as a percentage of net revenue, for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------
1995 1996 1997
------------ ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue......................... $4,624 100.0% $5,575 100.0% $6,627 100.0%
Cost of revenue..................... 4,045 87.5 5,084 91.2 6,304 95.1
------ ----- ------ ----- ------ -----
Gross profit........................ 579 12.5 491 8.8 323 4.9
Selling, general and administrative
expenses........................... 238 5.1 238 4.3 511 7.7
------ ----- ------ ----- ------ -----
Income (loss) from operations....... $ 341 7.4% $ 253 4.5% $ (188) (2.8)%
====== ===== ====== ===== ====== =====
</TABLE>
28
<PAGE>
Caron Results for Year Ended September 30, 1997 Compared to Year Ended
September 30, 1996
Net Revenue. Net revenue increased $1.1 million, or 18.9%, from $5.6 million
in 1996 to $6.6 million in 1997, primarily due to increased volume from a
major automobile leasing customer and general increases in volume in transport
services.
Gross Profit. Gross profit declined $168,000, or 34.2%, from $491,000 in
1996 to $323,000 in 1997. As a percentage of net revenue, gross profit
decreased from 8.8% in 1996 to 4.9% in 1997 as a result of increased costs
relating to investment in, and improvement and maintenance of, facilities and
equipment, many of which were expensed.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $273,000, or 115.0%, from $238,000 in 1996
to $511,000 in 1997. As a percentage of net revenue, selling, general and
administrative expenses increased from 4.3% in 1996 to 7.7% in 1997. These
increases resulted primarily from an increase in office and clerical staff to
support business growth.
Caron Results for Year Ended September 30, 1996 Compared to Year Ended
September 30, 1995
Net Revenue. Net revenue increased $951,000, or 20.6%, from $4.6 million in
1995 to $5.6 million in 1996, primarily due to increased demand for transport
services from automobile auction companies.
Gross Profit. Gross profit declined $88,000, or 15.2%, from $579,000 in 1995
to $491,000 in 1996. As a percentage of net revenue, gross profit decreased
from 12.5% to 8.8%, due to costs relating to business expansion.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses remained flat at $238,000. As a percentage of net
revenue, selling, general and administrative expenses decreased from 5.1% in
1995 to 4.3% in 1996.
Caron Liquidity and Capital Resources
At September 30, 1997, working capital deficiency was $199,000 and debt and
capital lease obligations outstanding were $1.5 million and $616,000,
respectively.
Caron used $86,000 net cash in operating activities in 1997. Net cash used
in investing activities was approximately $37,000, of which $333,000 was used
for equipment purchases, offset by $341,000 in proceeds from the sale of
property and equipment. Net cash provided by financing activities was
$201,000, relating primarily to an increase in borrowing.
ABSOLUTE RESULTS OF OPERATIONS
Absolute's primary business is towing and transporting insurance salvage
vehicles for insurance companies and automobile auction companies in Southern
California. Absolute has one facility in Los Angeles. It operates 17 vehicles
and has 20 employees and 35 independent contractors.
29
<PAGE>
The following table sets forth selected statement of operations data, and
such data as a percentage of net revenue, for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1997
------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue.......................... $3,465 100.0% $4,780 100.0%
Cost of revenue...................... 2,756 79.5 3,767 78.8
------ ----- ------ -----
Gross profit......................... 709 20.5 1,013 21.2
Selling, general and administrative
expenses............................ 636 18.4 1,095 22.9
------ ----- ------ -----
Income (loss) from operations........ $ 73 2.1% $ (82) (1.7)%
====== ===== ====== =====
</TABLE>
Absolute Results for 1997 Compared to 1996
Net Revenue. Net revenue increased $1.3 million, or 38.0%, from $3.5 million
in 1996 to $4.8 million in 1997. The growth in net revenue was primarily due
to a service arrangement with a national automobile auction company and a
large insurance company. Insurance related transport increased throughout
California due to a new state law requiring evidence of insurance in order to
register or operate a vehicle.
Gross Profit. Gross profit increased $305,000, or 43.1%, from $709,000 in
1996 to $1.0 million in 1997. As a percentage of net revenue, gross profit
increased from 20.5% in 1996 to 21.2% in 1997. These increases were the result
of increased volume of business and favorable economies of scale.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $459,000 or 72.3%, from $636,000 in 1996 to
$1.1 million in 1997. As a percentage of net revenue, selling, general and
administrative expenses increased from 18.4% in 1996 to 22.9% in 1997. These
increases were the result of an increase in officer compensation and increased
staffing to support business growth.
Absolute Liquidity and Capital Resources
At December 31, 1997, working capital was $25,000 and debt obligations
outstanding were $312,000.
Absolute used $302,000 net cash in operating activities in 1997. Net cash
used in investing activities was $159,000, which was used for equipment
purchases. Net cash provided by financing activities was $472,000 related
primarily to an increase in borrowings.
KEYSTONE RESULTS OF OPERATIONS
Keystone's primary business is towing, impounding and storing vehicles for
law enforcement agencies and commercial customers in Southern California.
Keystone also conducts lien sales of impounded vehicles. Keystone has one
facility in Los Angeles. It operates 21 vehicles and has 34 employees.
The following table sets forth selected statement of operations data, and
such data as a percentage of net revenue, for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue........................... $3,369 100.0% $3,943 100.0%
Cost of revenue....................... 2,132 63.3 2,607 66.1
------ ----- ------ -----
Gross profit.......................... 1,237 36.7 1,336 33.9
Selling, general and administrative
expenses............................. 934 27.7 1,140 28.9
------ ----- ------ -----
Income from operations................ $ 303 9.0% $ 196 5.0%
====== ===== ====== =====
</TABLE>
30
<PAGE>
Keystone Results for 1997 Compared to 1996
Net Revenue. Net revenue increased $574,000, or 17.0%, from $3.4 million in
1996 to $3.9 million in 1997. The growth in net revenue was primarily due to
increased law enforcement related activity and increased marketing efforts
commenced in late 1996, as well as an increase in storage fees for impounded
vehicles due to new California legislation relating to mandatory 30-day holds
on unlicensed and uninsured motorists enacted in 1996.
Gross Profit. Gross profit increased $100,000, or 8.1%, to $1.3 million in
1997 from $1.2 million in 1996. As a percentage of net revenue, gross profit
decreased from 36.7% in 1996 to 33.9% in 1997. The decrease as a percentage of
net revenue was caused primarily by increased depreciation related to
equipment purchases.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $206,000, or 22.1%, from $934,000 in 1996 to
$1.1 million in 1997. As a percentage of net revenue, selling, general and
administrative expenses increased from 27.7% in 1996 to 28.9% in 1997.
Keystone Liquidity and Capital Resources
At December 31, 1997, working capital deficiency was $602,000 and debt
obligations outstanding were $793,000.
Keystone generated $494,000 in net cash from operating activities in 1997.
Net cash used in investing activities was approximately $361,000, which was
used for the purchase of equipment. Net cash used in financing activities was
approximately $254,000, consisting primarily of a distribution to
stockholders.
AUTO SERVICE CONSOLIDATED RESULTS OF OPERATIONS
Auto Service's primary business is towing vehicles for commercial and
individual customers in the Sacramento, California region. Auto Service has
facilities in Sacramento. It operates 20 vehicles and has 48 employees.
The following table sets forth selected consolidated statement of operations
data, and such data as a percentage of net revenue, for the year indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net revenue...................................... $ 3,310 100.0%
Cost of revenue.................................. 2,364 71.4
----------- ----------
Gross profit..................................... 946 28.6
Selling, general and administrative expenses..... 765 23.1
----------- ----------
Income from operations........................... $ 181 5.5%
=========== ==========
</TABLE>
Auto Service Liquidity and Capital Resources
At December 31, 1997, working capital deficiency was $57,000 and debt and
capital lease obligations outstanding were $230,000 and $740,000,
respectively.
Auto Service generated $249,000 in net cash from operating activities in
1997. Net cash used in investing activities was approximately $216,000, which
was used for equipment and property purchases. Net cash provided by financing
activities was $30,000.
31
<PAGE>
BUSINESS
United Road Services was formed in July 1997 to become a leading national
provider of motor vehicle and equipment towing and transport services.
Simultaneously with consummation of the Offering, United Road Services will
acquire eight towing and transport service companies with combined net revenue
of $46.5 million in 1997, making the Company one of the largest providers of
these services in North America. The Founding Companies have been in business
for periods ranging from seven to 48 years and operate an aggregate of 17
facilities located in seven states. Combined net revenue of the Founding
Companies increased at a compound annual rate of approximately 26% from 1995
through 1997.
The Company offers a broad range of towing and transport services, including
towing, impounding and storing motor vehicles, conducting lien sales and
auctions of abandoned vehicles, and transporting new and used vehicles,
insurance salvage vehicles and heavy construction equipment. The Company
derives revenue from towing and transport services based on distance, time or
fixed charges and from impounding and storage services based on daily fees. In
the event that impounded vehicles are not claimed by their owners within
prescribed time periods, the Company is paid from the proceeds of lien sales
or auctions. The Company's customers include commercial entities, such as
automobile leasing companies, insurance companies, automobile auction
companies, automobile dealers, repair shops and fleet operators; law
enforcement agencies such as police, sheriff and highway patrol departments;
and individual motorists.
INDUSTRY OVERVIEW
The Company estimates that the towing and transport service industry
generated net revenue of approximately $15 billion in North America in 1997.
Based on available industry data, the Company believes that the industry is
highly fragmented with over 40,000 operating businesses in North America, most
of which are small, local and owner-operated, with limited access to capital
for modernization and expansion. The Company believes that recent industry
growth has been driven primarily by the following factors: an increase in the
number and average age of registered vehicles; a rise in government mandates
(and increased enforcement of such mandates) against unlicensed or uninsured
drivers and unregistered vehicles, which results in higher demand for towing
and impounding services; the growing popularity of leasing which, according to
the National Automobile Dealers Association, has risen from 5% of all new auto
sales in 1985 to 30% in 1996, thereby increasing demand for transport services
to move off-lease vehicles to auctions and dealers for sale; and the
increasing mobility of the United States workforce, which has increased demand
for automobile transport in connection with career-related moves.
The towing and transport service industry includes the following markets:
Law Enforcement Agency Towing. This market involves towing vehicles in
situations where the driver of the vehicle has been arrested or is unlicensed
or uninsured, or where the vehicle has been illegally parked, abandoned,
stolen and recovered, or is unregistered. This market also includes impounding
and storing towed vehicles in secure lots and conducting lien sales and
auctions when owners fail to claim their vehicles within a period prescribed
by law (typically between 30 and 90 days). These services are provided to
police, sheriff and highway patrol departments. Equipment used in this area
consists primarily of light- and medium-duty tow trucks and flatbed trucks.
New and Used Automobile Transport. This market involves transporting new and
used vehicles from factories and ports to automobile dealers, from automobile
auctions to dealers, and between dealers. Significant customers include
automobile manufacturers, leasing companies, insurance companies, automobile
dealers, long-distance transporters, brokers and individuals. Equipment used
in this area consists primarily of four- to ten-car carriers and flatbed
trucks.
Insurance Salvage Towing and Transport. This market involves the towing and
transport of damaged or destroyed vehicles and vehicles otherwise subject to
an insurance claim. These services are generally provided on a contractual
basis to insurance companies and automobile auction companies. Equipment used
in this area consists primarily of flatbed trucks.
32
<PAGE>
Private Impound Towing. This market involves towing, impounding and storing
vehicles illegally parked on private property. These services are similar to
law enforcement agency towing and are generally provided to private customers
such as shopping centers, retailers and hotels. Equipment used in this area
consists primarily of light- and medium-duty tow trucks and flatbed trucks.
Commercial Road Service. This market involves towing for commercial
customers such as automobile dealers and repair shops, as well as providing
towing, recovery and roadside assistance and repair of heavy-duty commercial
vehicles, such as trucks and buses, for commercial fleet operators. Equipment
used in this area ranges from light- and medium-duty trucks used for towing
small vehicles to large and sophisticated recovery vehicles costing up to
$350,000 used for towing trucks and buses.
Municipal Freeway Service Towing. This market involves patrolling a preset
route on heavily-used freeways and towing or otherwise assisting disabled
vehicles. These services are typically provided to local transit districts and
other transportation agencies. Equipment used in this area consists primarily
of light- and medium-duty tow trucks and flatbed trucks.
Heavy Equipment Transport. This market involves transporting heavy equipment
such as tractors and construction equipment from equipment rental yards to job
sites, or from one job site to another. Customers include construction
companies, contractors, municipalities and equipment leasing companies.
Equipment used in this area consists primarily of very large, heavy-duty
flatbed vehicles.
Consumer Road Service. This market involves towing and roadside assistance
and repair of passenger vehicles. Customers include individuals and national
motor clubs, which perform marketing and dispatch operations but typically
utilize independent companies to perform towing services. Equipment used in
this area consists primarily of light- and medium-duty tow trucks and flatbed
trucks.
STRATEGY
The Company believes there are significant opportunities for a national
provider of towing and transport services with high quality service to
increase revenue and profitability by expanding its scope of services and
customer base, achieving operating efficiencies and expanding through
acquisitions. The Company's management team includes executives with
experience in implementing acquisition programs and effectively integrating
acquired businesses, and representatives of the Founding Companies with
significant contacts and experience in the towing and transport service
industry. The Company believes that this management team and the fragmented
nature of the industry will provide the Company with the capability and
opportunity to implement an effective consolidation strategy. The Company
expects to obtain a $50.0 million revolving line of credit from Bank of
America to be used, in part, to finance future acquisitions.
OPERATING STRATEGY
Provide High Quality Service. The Company believes that timely, professional
and dependable service is the primary generator of repeat business in the
towing and transport service industry. The Company will seek to capitalize on
the particular strengths of the individual Founding Companies to offer high
quality service to all of its customers. The Company intends to implement
proven practices of the Founding Companies throughout its operations in areas
such as dispatching technology, driver training and professionalism,
preventive maintenance and safety.
Expand Scope of Services and Customer Base. The Company intends to expand
the scope of its services by introducing certain capabilities of the
individual Founding Companies in other markets where the Company believes such
services can be successfully marketed. The Company believes that its size and
financial and other resources will permit it to attract customers and
contracts that require greater towing, transporting and storage capabilities
than those possessed by local owner-operators. The Company intends to utilize
its geographic diversity to pursue additional business from existing customers
that operate on a regional or national basis, such as leasing companies,
insurance companies and automobile auction companies. The Company also will
seek to develop additional capabilities and services to complement its
existing operations. For example, as a key part of its development of a
national network of transport operations, the Company intends to establish
regional marshalling yards, which will enable the Company to collect vehicles
in one location and allocate them to particular transport vehicles and routes
to maximize asset utilization.
33
<PAGE>
Achieve Operating Efficiencies. The Company will seek to achieve operating
efficiencies through improved asset utilization by implementing a "hub-and-
spoke" strategy within identified towing markets, with a centralized hub for
management, dispatch and maintenance operations that supports multiple
satellite truck and impound yards. The Company believes that this strategy
will allow it to provide timely service throughout a particular market, while
also enabling it to consolidate certain duplicative dispatch systems and
facilities, thereby spreading certain fixed costs over a larger vehicle fleet.
The Company also expects to realize cost savings by centralizing certain
administrative functions at its headquarters in Albany, New York, including
insurance, employee benefits, accounting and risk management. In the future,
the Company intends to use its purchasing power to seek improved pricing in
areas such as fuel, vehicles and parts.
Maintain Local Expertise. The Company anticipates that the managements of
the Founding Companies and companies to be acquired in the future will
continue to maintain local control of their daily operations. The Company
believes that this will allow it to take advantage of the local and regional
market knowledge, name recognition and customer relationships possessed by
each acquired company.
ACQUISITION STRATEGY
Enter New Geographic Markets. As part of its "hub-and-spoke" operating
strategy, the Company intends to acquire established, high-quality companies
in markets where it can establish a leading market position to serve as core
businesses into which additional operations may be consolidated. The Company
also intends to acquire transport businesses with complementary transport
routes and capabilities in markets across North America in order to create an
integrated national transport network and use its regional towing operations
as feeders for its transport services.
Expand Within Existing Geographic Markets. Once the Company has established
a core presence in a market, it will seek to strengthen its market position by
acquiring additional large companies that offer similar services. The Company
will also pursue "tuck-in" acquisitions of smaller companies, whose businesses
can be integrated into the Company's operations, thereby utilizing the
Company's existing infrastructure over a broader vehicle fleet and revenue
base. In addition, the Company may seek to vertically integrate its operations
by acquiring companies which offer complementary services that the Company
does not currently offer. In cases where acquired companies have developed
local and regional goodwill and cultivated customer relationships, the Company
intends to maintain existing business names and identities.
The Company believes it will be regarded by acquisition candidates as an
attractive acquiror because of: (i) the Company's strategy for creating a
national, comprehensive and professionally managed towing and transport
service company; (ii) the Company's decentralized operating strategy, which
emphasizes an ongoing role for owners, management and key personnel of
acquired businesses, as well as meaningful equity positions for these
individuals which will enable them to participate in the Company's growth;
(iii) the Company's increased visibility and access to financial resources as
a public company; and (iv) the potential for increased profitability of
acquired companies due to centralization of administrative functions, access
to increased marketing resources and purchasing economies.
As consideration for future acquisitions, the Company intends to use a
combination of Common Stock, cash and debt. The consideration for each future
acquisition will vary on a case-by-case basis, with the major factors in
establishing the purchase price being historical operating results, future
prospects of the target and the ability of the target to complement the
services offered by the Company. Promptly after consummation of the Offering,
the Company intends to register 5,000,000 additional shares of Common Stock
under the Securities Act for issuance in future acquisitions. The Company
believes that it can structure acquisitions as tax-free reorganizations by
using its Common Stock as consideration, which it expects will be attractive
to those targeted business owners with a low tax basis in the stock of their
businesses. While the Company continuously considers possible acquisition
prospects as part of its growth strategy, the Company presently has no
agreements, arrangements or other understandings to acquire any companies
other than the Founding Companies.
34
<PAGE>
OPERATIONS AND SERVICES PROVIDED
The Company provides a broad range of towing and transport services for a
diverse group of commercial, governmental and individual customers. Towing and
transport services typically begin with a telephone call to the Company
requesting assistance or transport. The call may come from a law enforcement
officer, a commercial fleet dispatcher, a private business or an individual.
The dispatcher records the relevant information regarding the vehicle to be
towed or transported, checks the location and status of the Company's vehicle
fleet, typically using a computerized positioning system, and assigns the job
to a particular vehicle. The driver collects the vehicle and tows or
transports it to one of several locations, depending on the nature of the
customer.
Law Enforcement Agency Towing. The Company provides these towing services to
various law enforcement agencies. In this market, vehicles are typically towed
to a Company facility where the vehicle is impounded and placed in storage.
The vehicle remains in storage until its owner pays the towing fee, which is
typically based on an hourly charge, and any daily storage fees, to the
Company, as well as any fines due to the law enforcement agency. If the
vehicle is not claimed within a period prescribed by law (typically between 30
and 90 days), the Company completes lien proceedings and sells the vehicle at
auction or to a scrap metal facility, depending on the value of the vehicle.
Depending on the jurisdiction, the Company either may keep all of the proceeds
from vehicle sales, or may keep proceeds up to the amount of accrued towing
and storage fees and remit the remainder to the law enforcement agency. These
services are in some cases provided under contracts with police, sheriff and
highway patrol departments, typically for terms of five years or less, that
are terminable for material breach and are typically subject to competitive
bidding upon expiration. In other cases, the Company provides these services
to law enforcement agencies without a long-term contract. Whether pursuant to
a contract or an ongoing relationship, these services are generally provided
by the Company for a designated geographic area, or shared with one or more
other companies on a rotation basis.
New and Used Automobile Transport. The Company provides automobile transport
services to leasing companies, automobile dealers, automobile auction
companies, long-distance transporters, brokers and individuals. Services
typically are provided as needed by particular customers and charged according
to pre-set rates based on mileage. The Company transports large numbers of
vehicles from automobile auctions, where off-lease vehicles are sold, to
individual dealers. In addition, the Company provides transport services for
dealers who transfer new cars from one region to another based on demand. The
Company also provides local collection and delivery support to long-haul
automobile transporters. A significant portion of transport work in the
industry involves transporting automobiles from factories in the United States
to individual dealerships. The Company currently does not transport vehicles
for major domestic automobile manufacturers because this business is dominated
by a few large carriers with established relationships.
Insurance Salvage Towing and Transport. The Company provides insurance
salvage towing and transport services pursuant to contractual arrangements
with insurance companies and automobile auction companies for a per-vehicle
fee based on the transport distance. This business involves secondary towing
and transport, since the vehicles involved typically have already been towed
to a storage facility. For example, after an accident, the damaged or
destroyed vehicle is usually towed to a garage or impound yard. The Company's
insurance salvage towing and transport operations collect these towed vehicles
and transport them to repair shops, automobile auction companies or scrap
metal facilities at the direction of the customer.
Private Impound Towing. The Company provides private impound towing services
to private customers, such as shopping centers, retailers and hotels, which
engage the Company to tow vehicles that are parked illegally on their
property. As in law enforcement agency towing, revenues are generated by the
Company through the collection of towing and storage fees from vehicle owners,
and from the sale of vehicles that are not claimed.
Commercial Road Service. The Company provides commercial road services to a
broad range of commercial customers, including automobile dealers and repair
shops. The Company typically charges a flat fee and a mileage premium for
these towing services. Commercial road services also include towing and
recovery of
35
<PAGE>
heavy-duty trucks, recreational vehicles, buses and other large vehicles,
typically for commercial fleet operators. The Company charges an hourly rate
based on the towing vehicle used for these specialized services.
Heavy Equipment Transport. The Company provides heavy equipment transport
services to construction companies, contractors, municipalities and equipment
leasing companies. Service fees are based on the transport vehicle used and
the transport distance.
Consumer Road Service. The Company also tows disabled vehicles for
individual motorists and national motor clubs. Vehicles are generally towed to
repair facilities for a flat fee paid by either the individual motorist or the
motor club. Consumer road service represents a significant portion of the
towing and transport service industry, but the Company has not focused on this
area to date.
While the Company currently does not provide municipal freeway towing
services, it anticipates that it will do so in the future.
SALES AND MARKETING; CUSTOMERS
The Company believes that the commitment to consistent high quality service
demonstrated by the Founding Companies has produced long-term relationships
with many existing customers and positions the Company to expand market
penetration through the use of enhanced sales and marketing efforts. To date,
the Founding Companies have largely focused on building and maintaining
personal relationships with customers, while also using limited print
advertising in newspapers and industry periodicals. Upon consummation of the
Acquisitions, the Company will continue to focus its marketing efforts on
large governmental and commercial accounts, including leasing companies,
insurance companies and law enforcement agencies. The Company intends to
augment the capabilities and contacts of the owners and general managers of
the Founding Companies with a sales program designed to identify significant
target customers and expand working relationships with existing customers.
Although the Company generally has a diverse customer base, one customer,
Insurance Auto Auctions ("IAA"), accounted for approximately 10% of the
Company's combined net revenue in 1997. The Company provides towing and
transport services to IAA pursuant to a contract that expires in 1999, but
renews automatically for an additional three-year period, unless either party
elects to the contrary. The contract is terminable by either party at any time
for material breach upon 30 days' prior written notice. The Company expects
that IAA will continue to account for a significant percentage of the
Company's revenue for the foreseeable future. The loss of a significant
customer, including IAA, could have a material adverse effect on the Company's
business, financial condition and results of operations.
DISPATCH AND INFORMATION SYSTEMS
Each of the Founding Companies operates a local dispatch system to assign
individual towing and transport vehicles to particular service calls. Most of
the Founding Companies have computerized positioning systems which identify
and track vehicle location and status, thereby decreasing response times and
increasing asset utilization. Initially, the Company anticipates continuing to
use existing dispatch systems of the Founding Companies for its towing and
transport operations, while exploring possibilities with respect to
implementing a national dispatch system to support its transport operations
and building regional towing dispatch systems in identified markets where the
Company has established a leading market position.
Due to the recent formation of the Company, each of the Founding Companies
is currently using the accounting and financial reporting systems that it has
in place. The Company is beginning the process of selecting and implementing
systems that will enable it to centralize its accounting and financial
reporting activities at its headquarters in Albany, New York. The Company
anticipates that it will need to upgrade and expand its information technology
systems on an ongoing basis as it expands its operations and completes
acquisitions. The Company is not aware of any material systems problems
related to calendar year 2000 at any Founding Company and expects that its new
accounting and financial reporting system will be year 2000 compatible.
36
<PAGE>
COMPETITION
The towing and transport industry is highly fragmented and extremely
competitive. Competition for the delivery of towing and transport services is
based primarily on quality, service, timeliness, price and geographic
proximity. The Company competes with certain large towing and transport
companies on a regional and local basis, some of which may have greater
financial and marketing resources than the Company. The Company also competes
with thousands of smaller local companies, which may have lower overhead cost
structures than the Company and may, therefore, be able to provide their
services at lower rates than the Company. The Company believes that it will be
able to compete effectively because of its high quality service, geographic
scope, broad range of services offered, experienced management and operational
economies of scale. The Company intends to seek to differentiate itself from
its competition in terms of service and quality by investing in training,
systems and equipment and by offering a broad range of products and services.
The Company may also face competition for acquisition candidates from
companies which are attempting, or may attempt in the future, to consolidate
the towing and transport service industry. Some of the Company's current or
future competitors may be better positioned than the Company to finance
acquisitions, to pay higher prices for acquisition candidates pursued by the
Company or to finance their internal operations.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
Towing and transport services are subject to various federal, state and
local laws and regulations regarding equipment, driver certification, training
and recordkeeping, and workplace safety. The Company's vehicles and facilities
are subject to periodic inspection by the United States Department of
Transportation and similar state and local agencies. The Company's failure to
comply with such laws and regulations could subject it to substantial fines
and could lead to the closure of operations that are not in compliance. In
addition, certain government contracting laws and regulations may impact the
Company's ability to acquire complementary businesses in a given city or
county. The Founding Companies have numerous federal, state and local licenses
and permits for the conduct of their respective businesses, which may or may
not be transferable to the Company upon consummation of the Acquisitions. To
the extent that such licenses and permits are not transferable, the Company
will be required to reapply for such licenses in order to conduct its
business. Any failure by the Company to obtain such licenses and permits or
delay in the Company's receipt of such licenses and permits could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company's operations are subject to a number of federal, state and local
laws and regulations relating to the storage of petroleum products, hazardous
materials and impounded vehicles, as well as safety regulations relating to
the upkeep and maintenance of Company vehicles. In particular, the Company's
operations are subject to federal, state and local laws and regulations
governing leakage from salvage vehicles, waste disposal, the handling of
hazardous substances, environmental protection, remediation, workplace
exposure and other matters. The Company's management believes that the Company
is in substantial compliance with all such laws and regulations and does not
currently anticipate that the Company will be required to expend any
substantial amounts in the foreseeable future in order to meet current
environmental or workplace health and safety requirements. It is possible that
an environmental claim could be made against the Company or any of the
Founding Companies or that one or more of them could be identified by the
Environmental Protection Agency, a state agency or one or more third parties
as a potentially responsible party under federal or state environmental laws.
If the Company or any of the Founding Companies were to be named a potentially
responsible party, the Company could be forced to incur substantial
investigation, legal and remediation costs, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
SAFETY AND TRAINING
The Company is committed to continuing the Founding Companies' focus and
emphasis on safety and training. The Founding Companies currently utilize a
variety of programs to improve safety, including regular
37
<PAGE>
driver training and certification, drug testing and safety bonuses. The
Company plans to adopt these and other proven practices throughout its
operations to ensure that all employees comply with safety standards
established by the Company, its insurance carriers and federal, state and
local laws and regulations. In addition, the Company intends to continue to
promote the Founding Companies' emphasis on an accident-free environment. The
Company believes that its emphasis on safety and training will assist it in
attracting and retaining quality employees.
FACILITIES AND VEHICLES
The Company operates 17 facilities that are used to garage, repair and
maintain towing and transport vehicles, impound and store towed vehicles and
conduct lien sales and auctions. All of the Company's facilities are leased
from other parties and, in seven cases, those parties are former owners or
affiliates of the Founding Companies. See "Certain Transactions --Transactions
Involving Certain Directors and Principal Stockholders." Many of the Company's
facilities are capable of being utilized at higher capacities, if necessary.
The Company will seek to consolidate facilities and vehicle storage capacity
in the future.
The Company operates a fleet of approximately 300 towing and transport
vehicles. The Company believes these vehicles generally are well-maintained
and adequate for its current operations.
RISK MANAGEMENT, INSURANCE AND LITIGATION
The primary liability risks in the Company's operations include bodily
injury, property damage, workers' compensation claims and, potentially,
environmental and land use claims. Although each of the Founding Companies has
maintained its own insurance, the Company expects to obtain insurance on a
Company-wide basis, subject to customary deductibles. The Founding Companies
have been, from time to time, parties to litigation arising in the ordinary
course of their respective businesses, most of which involves claims for
personal injury or property damage incurred in connection with their
operations. The Company is not currently involved in any litigation that the
Company believes will have a material adverse effect on its business,
financial condition or results of operations.
EMPLOYEES
As of December 31, 1997, the Founding Companies had approximately 400
employees and approximately 95 independent contractors. None of the employees
of the Founding Companies are subject to collective bargaining agreements.
38
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth information concerning those persons who will
serve as the Company's directors and officers upon consummation of the
Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Edward T. Sheehan................ 55 Chairman of the Board, Chief Executive Officer and Secretary
Allan D. Pass.................... 48 Senior Vice President and Chief Operating Officer*
Donald J. Marr................... 39 Senior Vice President and Chief Financial Officer
Mark McKinney.................... 30 Co-Chief Acquisition Officer and Director
Ross Berner...................... 32 Co-Chief Acquisition Officer and Director
Richard P. McGinn, Jr............ 32 Vice President and Corporate Controller
Edward W. Morawski............... 49 Vice President and Director*
Grace M. Hawkins................. 52 Director*
Mark J. Henninger................ 40 Director*
Donald F. Moorehead, Jr.......... 47 Director*
Todd Q. Smart.................... 33 Director*
Edward D. Smith.................. 60 Director*
</TABLE>
- ---------------------
* To be elected as an officer or director of the Company effective upon
consummation of the Offering.
Edward T. Sheehan has served as Chairman of the Board and Chief Executive
Officer since October 1997. Mr. Sheehan was President and Chief Operating
Officer of United Waste Systems, Inc. from December 1992 to August 1997, when
the company was sold to USA Waste Services, Inc. He was Senior Vice President
and Chief Financial Officer of Clean Harbors, Inc., a publicly-held
environmental services company, from September 1990 to April 1992. From 1966
to 1990, Mr. Sheehan held several financial and operating positions with
General Electric Company ("GE"), including Manager--Finance for GE's power
generation service businesses, factory automation operations and Europe,
Africa and Middle East Divisions.
Allan D. Pass, Ph.D will become Senior Vice President and Chief Operating
Officer of the Company upon consummation of the Offering. In 1986, he founded,
and until February 1998 served as the Chief Executive Officer and President
of, National Behavioral Science Consultants, Inc., a consulting firm
specializing in innovative productivity and profitability enhancement and
human resource programs. From September 1991 until June 1995, Dr. Pass also
served as a Corporate Vice President for Chambers Development Corporation.
Donald J. Marr has served as Senior Vice President and Chief Financial
Officer of the Company since January 1998. From 1986 through 1997, he held a
series of management positions with KeyCorp, most recently as Senior Vice
President, Planning and Analysis. From January 1984 to October 1986, he held
various positions at the accounting firm of Coopers & Lybrand. Mr. Marr is a
certified public accountant.
Mark McKinney has been a senior executive officer and director of the
Company since its inception. He currently serves as Co-Chief Acquisition
Officer. From December 1995 to October 1997, Mr. McKinney was a portfolio
manager for Berger Associates, a leading mutual fund company. He was a
portfolio manager for Farmers Insurance Group from April 1992 to December
1995.
Ross Berner has been a senior executive officer and director of the Company
since its inception. He currently serves as Co-Chief Acquisition Officer. From
1992 through 1997, Mr. Berner held various equity sales and trading positions
at Salomon Brothers Inc.
Richard P. McGinn, Jr. has served as Vice President and Corporate Controller
of the Company since January 1998. From August 1996 to December 1997, he
served as Chief Financial Officer and Corporate Controller of Health Research
Inc., a non-profit corporation specializing in grant sponsored research
programs.
39
<PAGE>
From 1987 to August 1996, Mr. McGinn held various positions at the accounting
firm of KPMG Peat Marwick llp, including Senior Audit Manager. Mr. McGinn is a
certified public accountant.
Edward W. Morawski will become Vice President and a director of the Company
upon consummation of the Offering. Mr. Morawski founded Northland in 1977 and
has served as its President since inception.
Grace M. Hawkins will become a director of the Company upon consummation of
the Offering. Since 1991, Ms. Hawkins has been President of Lotus
Publications, Inc., a publishing company specializing in marketing for the
transportation industry. From 1985 to 1991, she served as President of T.T.
Publications, Inc., a magazine publisher. She has authored numerous articles
relating to the towing industry.
Mark J. Henninger will become a director of the Company upon consummation of
the Offering. Mr. Henninger will also continue to be involved in the
management of Keystone and will provide acquisition-related consulting
services to the Company upon consummation of the Acquisitions. Mr. Henninger
founded Keystone in 1991 and has served as its President since inception.
Donald F. Moorehead, Jr. will become a director of the Company upon
consummation of the Offering. From May 1994 to August 1997, he served as Vice
Chairman and Chief Development Officer of USA Waste Services, Inc., the third
largest solid waste management company in the United States. From October 1990
to May 1994, Mr. Moorehead was Chairman and Chief Executive Officer of Mid-
American Waste Systems, Inc.
Todd Q. Smart will become a director of the Company upon consummation of the
Offering. Mr. Smart will also continue to be involved in the management of
Absolute and will provide acquisition-related consulting services to the
Company upon consummation of the Acquisitions. Mr. Smart founded Absolute in
1988 and has served as its President since inception.
Edward D. Smith will become a director of the Company upon consummation of
the Offering. Mr. Smith has been President of Quality and Vice President of
Nevada Recycling Corporation since 1988.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors intends to establish an Audit Committee and a
Compensation Committee after the Offering. The Audit Committee will serve to:
(i) make recommendations to the Board of Directors with respect to the
independent auditors who conduct the annual examination of the Company's
accounts; (ii) review the scope of the annual audit and meet periodically with
the Company's independent auditors to review their findings and
recommendations; (iii) approve major accounting policies or changes thereto;
and (iv) periodically review the Company's principal internal financial
controls. The Compensation Committee will serve to review the compensation of
executive officers of the Company and make recommendations regarding such
compensation to the Board of Directors.
COMPENSATION OF DIRECTORS
Certain directors who are not employees or consultants of the Company will
receive (i) upon consummation of the Offering, a one-time grant of options to
purchase 20,000 shares of Common Stock at the initial public offering price
set forth on the cover of this Prospectus and (ii) cash compensation of
approximately $2,500 for each meeting attended. Directors who are employees or
consultants of the Company will not receive additional compensation for
serving as directors. All directors are reimbursed for expenses incurred in
attending meetings of the Board or committees thereof.
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE
The Company was incorporated in July 1997 and has not conducted any
operations to date other than activities related to the Acquisitions and the
Offering. The Company did not pay any of its executive officers compensation
during 1997. The Company anticipates that during 1998 its most highly
compensated executive officers will be Messrs. Sheehan, McKinney, Berner and
Marr and Dr. Pass (collectively, the "Named Executive Officers").
40
<PAGE>
The Company has entered into employment agreements with each of the Named
Executive Officers. Pursuant to such agreements, each executive is entitled to
receive a base salary and will be eligible to receive an annual performance
bonus as determined by the Board of Directors. The annual base salaries of the
executives are as follows: Mr. Sheehan--$200,000; Mr. McKinney--$150,000; Mr.
Berner--$150,000; Dr. Pass--$150,000; and Mr. Marr--$125,000. Each employment
agreement has an initial term of three years (beginning in February 1998 in
the case of Mr. Sheehan and January 1998 in the case of the other Named
Executive Officers), unless terminated by either party prior to the end of
such initial term. Each agreement also may be terminated upon the death or
disability of the executive or for "cause" upon notice by the Company to the
executive. The employment agreements provide that if the executive is
terminated without cause, such executive will be paid a severance amount
payable in accordance with the Company's regular pay schedule equal to the
base salary paid to such executive for the following periods: Mr. Sheehan--six
months; Mr. McKinney--one year; Mr. Berner--one year; Dr. Pass--two years; and
Mr. Marr--one year. For purposes of such severance payments, a voluntary
termination of employment by any of Messrs. McKinney, Berner or Marr or Dr.
Pass within six months after a termination of employment of Mr. Sheehan for
any reason constitutes a termination without cause. Mr. Sheehan's employment
agreement contains a covenant not to solicit employees or customers of the
Company for a period of one year after termination of his employment. The
employment agreements of each of the other Named Executive Officers contain
covenants not to compete with the Company and covenants not to solicit
employees or customers of the Company for a period of one year following
termination of the agreements.
1998 STOCK OPTION PLAN
The Company's 1998 Stock Option Plan (the "1998 Stock Option Plan") is
intended to provide directors, officers, employees and consultants of the
Company with an opportunity to invest in the Company and to advance the
interests of the Company and its stockholders by enabling the Company to
attract and retain qualified personnel. The 1998 Stock Option Plan provides
for the grant of incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, and nonqualified stock options.
The maximum number of shares of Common Stock that may be subject to options
granted under the 1998 Stock Option Plan may not exceed, in the aggregate, the
number of shares equal to 10% of the shares of Common Stock outstanding
immediately following consummation of the Offering. Shares of Common Stock
that are attributable to grants that have expired, terminated or been
cancelled or forfeited are available for issuance in connection with future
grants. The Compensation Committee will administer the 1998 Stock Option Plan
and select the individuals who will receive awards and establish the terms and
conditions of such awards.
Options to purchase a total of 215,000 shares of Common Stock at an exercise
price of $9.00 per share have been granted to officers and consultants of the
Company as follows: 90,000 shares to Dr. Pass; 50,000 shares to Mr. Marr;
40,000 shares to Mr. McGinn; and an aggregate of 35,000 shares to two
consultants. Each such option will vest at the rate of 33 1/3% per year,
commencing on January 23, 1999, and will expire ten years from the date of
grant. Upon consummation of the Offering, options to purchase an aggregate of
40,000 shares of Common Stock are expected to be granted to two directors of
the Company at an exercise price equal to the initial public offering price
set forth on the cover page of the Prospectus.
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
In connection with the formation of the Company, the Company issued to each
of Messrs. Berner and McKinney 930,000 shares of Common Stock for cash
consideration of $25,000 each. At December 31, 1997, Messrs. Berner and
McKinney had advanced $92,000 to the Company to pay certain expenses incurred
by the Company in connection with the Acquisitions and the Offering. These
advances bear interest at a rate of 8.5% per annum.
In November 1997, the Company issued 744,000 shares of Common Stock to Mr.
Sheehan for cash consideration of $20,000. Mr. Sheehan purchased the shares
under a Stock Purchase and Restriction Agreement pursuant to which such shares
are subject to repurchase by the Company, at the Company's discretion, at the
41
<PAGE>
price paid for such shares in the event that Mr. Sheehan voluntarily
terminates his employment or is discharged for "cause." This repurchase right
will expire with respect to 372,000 shares upon consummation of the Offering,
and with respect to the remaining 372,000 shares in August 1999.
In January 1998, the Company issued an aggregate of 218,736 shares of Common
Stock to private investors for cash consideration of $735,000, of which Mr.
Moorehead purchased 29,760 shares for $100,000 and Mr. Smith purchased 11,904
shares for $40,000.
Simultaneously with consummation of the Offering, each of the Founding
Companies will merge with and into United Road Services. The aggregate
consideration to be paid by United Road Services in the Acquisitions is $32.3
million in cash, 2,753,365 shares of Common Stock and the assumption of
approximately $10.6 million in outstanding indebtedness of the Founding
Companies. In addition, following each of the years 1998 through 2002 the
Company will be required to make an earn-out payment to the stockholders of
each Founding Company that achieves revenue growth (i) over a targeted amount
of revenue for 1998 (generally equal to 110% of 1997 revenue of their
business) and (ii) ten percent over the greater of actual revenue or targeted
revenue of the business for the immediately preceding year for each of the
succeeding four years after 1998. Any required earn-out payments will be made
in the form of Common Stock of the Company.
The consummation of each Acquisition is subject to customary conditions.
These conditions include, among others, the continuing accuracy on the closing
date of the Acquisitions of the representations and warranties of the Founding
Companies and the principal stockholders thereof and of United Road Services,
the performance by each of them of all covenants included in the agreements
relating to the Acquisitions and the non-existence of a material adverse
change in the business, financial condition or results of operations of each
Founding Company. There can be no assurance that the conditions to closing of
the Acquisitions will be satisfied or waived or that the Acquisitions will be
consummated.
The following table sets forth the consideration to be paid by United Road
Services for each Founding Company based on the Offering Price (without giving
effect to any earn-out payments that may be required) and the total
indebtedness which would have been assumed by the Company had the Acquisitions
occurred on December 31, 1997:
<TABLE>
<CAPTION>
SHARES OF TOTAL
NAME CASH COMMON STOCK INDEBTEDNESS
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Northland................................ $ 8,307 692,277 $ 1,623
Falcon................................... 4,282 356,850 1,646
Quality.................................. 5,129 485,750 2,527
Caron.................................... 3,000 250,000 2,125
Absolute................................. 3,567 297,267 312
Keystone................................. 4,531 377,624 793
Auto Service............................. 1,651 137,554 969
Milne.................................... 1,873 156,043 636
------- --------- -------
Total.................................. $32,340 2,753,365 $10,631
======= ========= =======
</TABLE>
In connection with the Acquisitions and as consideration for their interests
in the Founding Companies, certain officers, directors, persons who have
agreed to serve as directors and holders of more than five percent of the
outstanding shares of Common Stock of the Company upon consummation of the
Offering, will receive cash and shares of Common Stock as follows:
<TABLE>
<CAPTION>
SHARES OF
NAME CASH COMMON STOCK
(IN THOUSANDS)
<S> <C> <C>
Edward W. Morawski............................. $8,307 692,277
Edward D. Smith................................ 410 38,860
Todd Q. Smart.................................. 3,567 297,267
Mark J. Henninger.............................. 4,531 377,624
</TABLE>
42
<PAGE>
Prior to consummation of the Acquisitions, Keystone intends to make a cash
distribution to Mr. Henninger in an amount that is expected to be less than
$150,000. In addition, Keystone and Quality intend to distribute to Mr.
Henninger and Mr. Smart, respectively, assets with book values of $56,000 and
$65,000, respectively.
From time to time, Quality advances amounts to, and borrows amounts from,
entities of which Mr. Smith is a shareholder. At December 31, 1997, Mr. Smith
owed Quality a net amount of approximately $743,000. This amount, plus accrued
interest of approximately $89,000, will be repaid to Quality prior to
consummation of the Offering. Quality and such affiliated entities have agreed
that there will be no further advances subsequent to December 31, 1997.
Quality has, in the past, paid management fees to Eureka Management LLC
("Eureka"), an entity which is approximately 50% owned by Mr. Smith. Prior to
consummation of the Offering, Quality will pay $80,000 to Eureka for
management fees accrued in 1998. Fees paid to Eureka were $200,000 in each of
the fiscal years ended January 31, 1996 and 1997.
Pursuant to the agreements entered into in connection with the Acquisitions,
the stockholders of the Founding Companies have agreed not to compete with the
Company for a period of five years from the date of consummation of the
Offering in defined businesses and geographic areas.
TRANSACTIONS INVOLVING CERTAIN DIRECTORS AND PRINCIPAL STOCKHOLDERS
Upon consummation of the Acquisitions, the Company will enter into
consulting agreements with each of Mr. Smart and Mr. Henninger. Pursuant to
each agreement, each of Messrs. Smart and Henninger is entitled to receive
from the Company a consulting fee equal to two percent of the gross revenue of
each company that Mr. Smart or Mr. Henninger, as the case may be, assists the
Company in acquiring, with the fee being based upon such acquired company's
gross revenue for the twelve months immediately preceding the acquisition.
Each consulting agreement is for a term of three years. In addition, upon
consummation of the Acquisitions, the Company will enter into an employment
agreement with Mr. Morawski pursuant to which he will serve as a Vice
President of the Company for a term of three years, with an annual base salary
of $125,000 per year. The employment and consulting agreements described above
also contain a covenant not to compete with the Company for one year after the
termination of the employment or consulting agreement.
Mr. Henninger is seeking the award of a contract for police towing in a
police district in Los Angeles. Mr. Smart is seeking a similar award in
another district. If either such award is made, Mr. Henninger or Mr. Smart, as
the case may be, will conduct such operations through a newly formed entity to
be controlled by him. The Company has the option to purchase such entities,
commencing one year after consummation of the Offering in the case of Mr.
Henninger and 18 months after consummation of the Offering in the case of Mr.
Smart, ending in either case three years after consummation of the Offering.
The purchase price under each of these options is a multiple of the pro forma
net income of the entity for the 12-month period prior to exercise of the
option.
Prior to consummation of the Acquisitions (i) Mr. Smith and another
stockholder of Quality will form Exodous Holdings LLC ("Exodous") and
contribute a portion of the shares they own in Quality to Exodous in return
for ownership interests in Exodous of 49% and 51%, respectively; and (ii)
Quality will repurchase the shares of Quality held by Exodous in exchange for
the transfer to Exodous of real estate and related property owned by Quality
with a book value of approximately $917,000. Upon consummation of the
Acquisitions, the Company will lease such real estate and related property
from Exodous pursuant to a five year lease for an annual rent of approximately
$46,000 per annum for the first 30 months and approximately $70,000 per annum
for the final 30 months. In addition, certain outstanding indebtedness of
Quality to its former owner (which totalled approximately $1.6 million as of
December 31, 1997) that is secured by the capital stock and certain assets of
Quality, including the real property to be transferred to Exodous, will be
assumed by the Company in connection with the Acquisitions.
43
<PAGE>
Quality currently leases certain real property in Las Vegas, Nevada from
Nevada Recycling Corporation, of which Mr. Smith is a 50% shareholder. Amounts
paid pursuant to such leases were approximately $96,000 for the year ended
January 31, 1997 and approximately $108,000 for the twelve-month period ended
December 31, 1997. Upon consummation of the Acquisitions, the Company will
lease such facilities from Nevada Recycling Corporation pursuant to two
separate lease agreements that each have a term of five years and provide for
an annual rent of $96,000 and $12,000, respectively.
Certain stockholders of the Founding Companies who will become directors of
the Company upon consummation of the Offering have guaranteed obligations of
their respective Founding Companies. The Company intends to obtain the release
of these guarantees as soon as practicable following consummation of the
Offering.
COMPANY POLICY
Any future transactions with directors, officers, employees or affiliates of
the Company will be approved in advance by a majority of disinterested members
of the Board of Directors.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information (after giving effect to
the issuance of shares of Common Stock in connection with the Acquisitions)
regarding the beneficial ownership of the Company's Common Stock as of
February 15, 1998 prior to the Offering and after giving effect to the
Offering, by (a) each person who is known by the Company to own beneficially
more than five percent of the outstanding shares of Common Stock, (b) each of
the Company's directors and persons who have agreed to serve as directors of
the Company ("director nominees"), (c) each Named Executive Officer, and (d)
all directors, director nominees and executive officers as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
securities listed below, based on information provided by such owners, have
sole investment and voting power with respect to the Common Stock shown below
as being beneficially owned by them, subject to community property laws where
applicable. Unless otherwise indicated, the address of each beneficial owner
is c/o United Road Services, Inc., 8 Automation Lane, Albany, New York 12205.
<TABLE>
<CAPTION>
PERCENT
-----------------
NUMBER OF BEFORE AFTER
NAME SHARES OFFERING OFFERING
<S> <C> <C> <C>
Mark McKinney...................................... 930,000 16.7% 8.4%
Ross Berner........................................ 930,000 16.7 8.4
Edward T. Sheehan.................................. 744,000 13.3 6.7
Edward W. Morawski................................. 692,277 12.4 6.3
Mark J. Henninger.................................. 377,624 6.8 3.4
John David Floyd................................... 356,850 6.4 3.2
Todd Q. Smart...................................... 297,267 5.3 2.7
Edward D. Smith.................................... 50,764 * *
Donald F. Moorehead, Jr............................ 29,760 * *
Allan D. Pass...................................... -- -- --
Donald J. Marr..................................... -- -- --
Grace M. Hawkins................................... -- -- --
All directors, director nominees and executive
officers as a group (11 persons).................. 4,051,692 72.7% 36.6%
</TABLE>
- ---------------------
* Less than one percent.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 40,000,000 shares of
capital stock consisting of 35,000,000 shares of Common Stock, $0.001 par
value, and 5,000,000 shares of Preferred Stock, $0.001 par value. Upon
consummation of the Acquisitions and the Offering, there will be 11,076,101
shares of Common Stock and no shares of Preferred Stock outstanding. The
following discussion of the material features of the capital stock of the
Company is intended as a summary only and is qualified in its entirety by
reference to the Company's Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws, which are included as exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record by them on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of Preferred
Stock that may be issued, the holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available for the payment of
dividends. See "Dividend Policy." In the event of a liquidation, dissolution
or winding up of the Company, the holders of Common Stock are entitled to
share ratably in all assets remaining after payment of liabilities and
liquidation preferences of any outstanding shares of Preferred Stock. Holders
of Common Stock have no preemptive rights or rights to convert their Common
Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable, and the shares of Common Stock to be
issued in the Offering and pursuant to the Acquisitions will be fully paid and
non-assessable.
PREFERRED STOCK
The Company's Board of Directors (the "Board") has the authority, without
action by the stockholders, to designate and issue up to 5,000,000 shares of
Preferred Stock in one or more series and to designate the dividend rate,
voting rights and other rights, preferences and restrictions of each series,
any or all of which may be greater than the rights of the Common Stock. The
Company has no present plans to issue any shares of Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board to discourage an attempt to obtain control of the Company by means of a
tender offer, proxy contest, merger or otherwise and to protect the continuity
of the Company's management. The issuance of shares of Preferred Stock may
adversely affect the rights of holders of Common Stock. For example, Preferred
Stock issued by the Company may rank prior to the Common Stock as to dividend
rights, liquidation preference or both, may have full or limited voting rights
and may be convertible into shares of Common Stock. Accordingly, the issuance
of shares of Preferred Stock may discourage bids for the Common Stock or may
otherwise adversely affect the market price of the Common Stock.
CLASSIFIED BOARD OF DIRECTORS; FILLING VACANCIES
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that the Board shall be divided into three classes and
that the number of directors in each class shall be as nearly equal as is
possible based upon the number of directors constituting the entire Board. The
Certificate effectively provides that the term of office of the first class
will expire at the annual meeting of stockholders following the date of this
Prospectus, the term of office of the second class will expire at the second
annual meeting of stockholders following the date of the Prospectus, and the
term of office of the third class will expire at the third annual meeting of
stockholders following the date of this Prospectus. At each annual meeting of
stockholders, successors to directors of the class whose term expires at such
meeting will be elected to serve for three-year terms and until their
successors are elected and qualified.
46
<PAGE>
The classification of directors has the effect of making it more difficult
for stockholders to change the composition of the Board. At least two annual
meetings of stockholders, instead of one, will generally be required to effect
a change in a majority of the Board. Such a delay may help to provide the
Board with sufficient time to analyze an unsolicited proxy contest, a tender
or exchange offer or any other extraordinary corporate transaction. However,
such classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or
otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its stockholders. The
classification of the Board could thus increase the likelihood that incumbent
directors will retain their positions.
Under Delaware law, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may only be removed by
the stockholders for cause. The Certificate does not override this provision.
The Certificate does provide that, subject to the rights of any holders of
Preferred Stock, newly created directorships resulting from an increase in the
authorized number of directors or vacancies on the Board resulting from death,
resignation, retirement, disqualification or removal of directors or any other
cause may be filled only by the Board (and not by the stockholders unless
there are no directors in office), provided that a quorum is then in office
and present, or by a majority of the directors then in office, if less than a
quorum is then in office, or by the sole remaining director. Accordingly, the
Board could prevent any stockholder from enlarging the Board and filling the
new directorships with such stockholder's own nominees.
The provisions of the Certificate governing the removal of directors and the
filling of vacancies may have the effect of discouraging a third party from
initiating a proxy contest, making a tender offer or otherwise attempting to
gain control of the Company, or of attempting to change the composition or
policies of the Board, even though such attempts might be beneficial to the
Company or its stockholders. These provisions of the Certificate could thus
increase the likelihood that incumbent directors will retain their positions.
STOCKHOLDER MEETING PROVISIONS
The Certificate and the Company's Amended and Restated Bylaws (the "Bylaws")
provide that (subject to the rights of any holders of Preferred Stock) (i)
only a majority of the Board or the Chief Executive Officer is able to call a
special meeting of stockholders; and (ii) stockholder action may be taken only
at a duly called and convened annual or special meeting of stockholders and
may not be taken by written consent. These provisions, taken together, prevent
stockholders from forcing consideration by the stockholders of stockholder
proposals over the opposition of the Board, except at an annual meeting.
The Bylaws establish an advance notice procedure for stockholders to make
nominations of candidates for election as director, or to bring other business
before an annual meeting of stockholders of the Company (the "Notice
Procedure").
The Notice Procedure provides that, subject to the rights of any holders of
Preferred Stock, only persons who are nominated by or at the direction of the
Board, any committee appointed by the Board, or by a stockholder who has given
timely written notice to the Secretary of the Company prior to the meeting at
which directors are to be elected will be eligible for election as directors
of the Company. The Notice Procedure provides that at an annual meeting only
such business may be conducted as has been brought before the meeting by, or
at the direction of, the Board, any committee appointed by the Board, or by a
stockholder who has given timely written notice to the Secretary of the
Company of such stockholder's intention to bring such business before such
meeting. Under the Notice Procedure, to be timely, notice of stockholder
nominations or proposals to be made at an annual or special meeting must be
received by the Company not less than 60 days nor more than 90 days prior to
the scheduled date of the meeting (or, if less than 70 days' notice or prior
public disclosure of the date of the meeting is given, then not later than the
15th day following the earlier of (i) the day such notice was mailed or (ii)
the day such public disclosure was made). These notices must contain certain
prescribed information.
47
<PAGE>
The Notice Procedure affords the Board an opportunity to consider the
qualifications of proposed director nominees or the merit of stockholder
proposals, and, to the extent deemed appropriate by the Board, to inform
stockholders about such matters, and also provides a more orderly procedure
for conducting annual meetings of stockholders.
Although the Bylaws do not give the Board any power to approve or disapprove
stockholder nominations for the election of directors or proposals for action,
the foregoing provisions may have the effect of precluding a contest for the
election of directors or the consideration of stockholder proposals and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal, if
the proper advance notice procedures are not followed, without regard to
whether consideration of such nominees or proposals might be harmful or
beneficial to the Company and its stockholders.
DELAWARE LAW
The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, Section
203 prevents an "interested stockholder" (defined generally as a person owning
15% or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined) with a Delaware corporation for three
years following the date such person became an interested stockholder, subject
to certain exceptions such as approval of the board of directors and of the
holders of at least two-thirds of the outstanding shares of voting stock not
owned by the interested stockholder. The existence of this provision is
expected to have an anti-takeover effect, possibly inhibiting attempts that
might result in a premium over the market price for the shares of Common Stock
held by stockholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Pursuant to the provisions of the Delaware General Corporation Law, the
Company has adopted provisions in the Certificate which provide that directors
of the Company shall not be personally liable for monetary damages to the
Company or its stockholders for a breach of fiduciary duty as a director,
except for liability as a result of (i) a breach of the director's duty of
loyalty to the Company or its stockholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) an act related to the unlawful stock repurchase or payment of a dividend
under Section 174 of Delaware General Corporation Law; and (iv) transactions
from which the director derived an improper personal benefit. Such limitation
of liability does not affect the availability of equitable remedies such as
injunctive relief or rescission.
The Bylaws require the Company to indemnify its officers and directors and
permit the Company to indemnify its other agents, by bylaws, agreements or
otherwise, to the fullest extent permitted under Delaware law. The Company
intends to enter into separate indemnification agreements with its directors
and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may
arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms.
TRANSFER AGENT
The Company's transfer agent and registrar for its Common Stock is
.
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect the market price of the Common Stock. Upon consummation of
the Offering and the Acquisitions, the Company will have outstanding an
aggregate of 11,076,101 shares of Common Stock, assuming (i) the issuance of
5,500,000 shares of Common Stock in the Offering and (ii) no exercise of the
Underwriters' over-allotment option. Of these shares, the 5,500,000 shares
sold in the Offering will be freely tradable without restriction or further
registration under the Securities Act, except for any shares purchased by
affiliates of the Company (whose sales would be subject to certain limitations
and restrictions described below).
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares of Common Stock
for at least one year (including the holding period of any prior owner except
an affiliate) is entitled to sell in "broker's transactions" or to market
makers, within any three-month period commencing 90 days after the date of
this Prospectus, a number of shares that does not exceed the greater of (i)
one percent of the number of shares of Common Stock then outstanding
(approximately 110,760 shares immediately after the Offering) or (ii)
generally, the average weekly trading volume in the Common Stock during the
four calendar weeks preceding the required filing of a Form 144 with respect
to such sale. Sales under Rule 144 are generally subject to the availability
of current public information about the Company. Under Rule 144(k), a person
who is not deemed to have been an affiliate of the Company at any time during
the 90 days preceding a sale, and who has beneficially owned the shares of
Common Stock proposed to be sold for at least two years, is entitled to sell
such shares without having to comply with the manner of sale, public
information, volume limitation or notice filing provisions of Rule 144.
Each of the Company, its executive officers and directors and certain
stockholders of the Company has agreed, subject to certain exceptions
described below, not to (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise) for a period of 180 days after the date of this Prospectus
without the prior written consent of DLJ except for issuances of shares of
Common Stock by the Company in connection with future acquisitions. In
addition, certain executive officers of the Company and the stockholders of
the Founding Companies receiving Common Stock pursuant to the Acquisitions,
holding an aggregate of 5,387,125 shares of Common Stock, have agreed with the
Company not to sell, transfer or otherwise dispose of any of their shares of
Common Stock for a period of one year after the date of consummation of the
Offering.
The Company's existing stockholders have, and the stockholders of the
Founding Companies will receive, certain rights to include their shares in
registrations of Common Stock under the Securities Act that the Company
effects in the future (other than registrations in connection with future
acquisitions or employee benefit plans), including registrations that may
occur within one year after consummation of the Offering. Such stockholders
also have certain rights commencing two years after consummation of the
Offering to require the Company to effect a registration of their shares of
Common Stock. During the 180-day lockup period described above, the Company
has agreed not to file any registration statement with respect to, and each of
its executive officers, directors and certain stockholders of the Company has
agreed not to make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock without DLJ's prior written
consent except for registration of shares of Common Stock to be issued upon
exercise of stock options under the Company's stock option plan. After
consummation of the Offering, options to purchase 255,000 shares of Common
Stock will be outstanding and an additional 852,610 shares of Common Stock
will be reserved for issuance pursuant to the Company's 1998 Stock Option
Plan. The Company intends to register under the Securities Act all of the
shares of Common Stock underlying such options. In addition, DLJ has agreed to
allow the Company to register 5,000,000 shares of Common Stock under the
Securities Act upon consummation of the Offering for use by the Company in
future acquisitions. These shares generally will be freely tradeable after
their issuance.
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement dated
, 1998 (the "Underwriting Agreement"), the Underwriters named
below, who are represented by Donaldson, Lufkin & Jenrette Securities
Corporation, Credit Suisse First Boston and BancAmerica Robertson Stephens
(the "Representatives"), have severally agreed to purchase from the Company
the respective number of shares of Common Stock set forth opposite their names
below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..............
Credit Suisse First Boston.......................................
BancAmerica Robertson Stephens...................................
-----
Total..........................................................
=====
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal
matters and to certain other conditions. The Underwriters are obligated to
purchase and accept delivery of all the shares of Common Stock offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased.
The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain dealers (including
the Underwriters) at such price less a concession not in excess of $
per share. The Underwriters may allow, and such dealers may re-allow, to
certain other dealers a concession not in excess of $ per share. After
the initial offering of the Common Stock, the public offering price and other
selling terms may be changed by the Representatives at any time without
notice. The Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase, from time to time, in
whole or in part, up to an aggregate of additional shares of Common
Stock at the initial public offering price less underwriting discounts and
commissions. The Underwriters may exercise such option solely to cover
overallotments, if any, made in connection with the Offering. To the extent
that the Underwriters exercise such option, each Underwriter will become
obligated, subject to certain conditions, to purchase its pro rata portion of
such additional shares based on such Underwriter's percentage underwriting
commitment as indicated in the preceding table.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.
Each of the Company, its executive officers and directors and certain
stockholders of the Company has agreed, subject to certain exceptions
described below, not to (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise) for a period of 180 days after the date of this Prospectus
without the prior written consent of DLJ, except for issuances of shares of
Common Stock by the Company in connection with future acquisitions. In
addition, certain executive officers of the Company and the stockholders of
the Founding Companies receiving Common Stock pursuant to the Acquisitions,
holding an aggregate of 5,387,125 shares of Common Stock, have agreed with the
Company not to sell, transfer or otherwise dispose of any of their shares of
Common Stock for a period of one year after the date of consummation of the
Offering.
50
<PAGE>
The Company's existing stockholders have, and the stockholders of the
Founding Companies will receive, certain rights to include their shares in
registrations of Common Stock under the Securities Act that the Company
effects in the future (other than registrations in connection with future
acquisitions or employee benefit plans), including registrations that may
occur within one year after consummation of the Offering. Such stockholders
also have certain rights commencing two years after consummation of the
Offering to require the Company to effect a registration of their shares of
Common Stock. During the 180-day lockup period described above, the Company
has agreed not to file any registration statement with respect to, and each of
its executive officers, directors and certain stockholders of the Company has
agreed not to make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock without DLJ's prior written
consent except for the registration of shares of Common Stock to be issued
upon the exercise of stock options under the Company's stock option plan. DLJ
has agreed to allow the Company to register 5,000,000 shares of Common Stock
under the Securities Act upon consummation of the Offering for use by the
Company in future acquisitions. See "Shares Eligible For Future Sale."
Prior to the Offering, there has been no established trading market for the
Common Stock. The initial public offering price for the shares of Common Stock
offered hereby will be determined by negotiation among the Company and the
Representatives. The factors to be considered in determining the initial
public offering price include the history of and the prospects for the
industry in which the Company competes, the past and present operations of the
Company, the historical results of operations of the Company, the prospects
for future earnings of the Company, the recent market prices of securities of
generally comparable companies and the general condition of the securities
markets at the time of the Offering.
The Company has applied to have the Common Stock approved for listing on the
Nasdaq National Market under the symbol "URSI."
Other than in the United States, no action has been taken by the Company or
the Underwriters that would permit a public offering of the shares of Common
Stock offered hereby in any jurisdiction where action for that purpose is
required. The shares of Common Stock offered hereby may not be offered or
sold, directly or indirectly, nor may this Prospectus or any other offering
material or advertisements in connection with the offer and sale of any such
shares of Common Stock be distributed or published in any jurisdiction, except
under circumstances that will result in compliance with the applicable rules
and regulations of such jurisdiction. Persons into whose possession this
Prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the Offering and the distribution of this Prospectus.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any shares of Common Stock offered hereby in any jurisdiction in
which such an offer or a solicitation is unlawful.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may overallot the Offering, creating a
syndicate short position. The Underwriters may bid for and purchase shares of
Common Stock in the open market to cover such syndicate short position or to
stabilize the price of the Common Stock. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members if the
syndicate repurchases previously distributed Common Stock in syndicate
covering transactions, in stabilization transactions or otherwise. These
activities may stabilize or maintain the market price of the Common Stock
above independent market levels. The Underwriters are not required to engage
in these activities, and may end any of these activities at any time.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed on for the
Company by Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard, Rice"), San Francisco, California. Certain directors of
Howard, Rice own in the aggregate 9,672 shares of Common Stock of the Company.
Certain legal matters will be passed on for the Underwriters by McDermott,
Will & Emery, Chicago, Illinois.
51
<PAGE>
EXPERTS
The financial statements of United Road Services, Inc., the combined
financial statements of Northland Auto Transporters, Inc. and Northland Fleet
Leasing, Inc., the combined financial statements of Caron Auto Works, Inc. and
Caron Auto Brokers, Inc., the consolidated financial statements of Smith-
Christensen Enterprises, Inc. and subsidiary, the consolidated financial
statements of ASC Transportation Services and subsidiary, and the financial
statements of Falcon Towing and Auto Delivery, Inc., Absolute Towing and
Transporting, Inc., and Keystone Towing, Inc. to the extent and for the
periods indicated in their reports, have been included herein and in the
registration statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Common Stock offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and, in each instance, reference
is made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference to such exhibit. Copies of the Registration Statement may be
examined without charge at the Public Reference Section of the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor, New York,
New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any portion of the Registration
Statement can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of certain fees
prescribed by the Commission. The Commission maintains a World Wide Web site
that contains registration statements, reports, proxy and information
statements and other information regarding registrants (including the Company)
that file electronically with the Commission. The address of such World Wide
Web site is http://www.sec.gov.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNITED ROAD SERVICES, INC. AND FOUNDING COMPANIES UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
Unaudited Pro Forma Combined Financial Statements--Basis of Presenta-
tion.................................................................. F-3
Unaudited Pro Forma Combined Balance Sheet............................. F-4
Unaudited Pro Forma Combined Statement of Operations................... F-5
Notes to Unaudited Pro Forma Combined Financial Statements............. F-6
UNITED ROAD SERVICES, INC.
Independent Auditors' Report........................................... F-8
Balance Sheet.......................................................... F-9
Statement of Operations................................................ F-10
Statement of Stockholders' Equity (Deficit)............................ F-11
Statement of Cash Flows................................................ F-12
Notes to Financial Statements.......................................... F-13
FOUNDING COMPANIES
NORTHLAND AUTO TRANSPORTERS, INC. AND NORTHLAND FLEET LEASING, INC.
Independent Auditors' Report........................................... F-15
Combined Balance Sheets................................................ F-16
Combined Statements of Operations...................................... F-17
Combined Statements of Stockholder's Equity............................ F-18
Combined Statements of Cash Flows...................................... F-19
Notes to Combined Financial Statements................................. F-20
FALCON TOWING AND AUTO DELIVERY, INC.
Independent Auditors' Report........................................... F-26
Balance Sheets......................................................... F-27
Statements of Operations............................................... F-28
Statements of Stockholder's Equity..................................... F-29
Statements of Cash Flows............................................... F-30
Notes to Financial Statements.......................................... F-31
SMITH-CHRISTENSEN ENTERPRISES, INC. AND SUBSIDIARY
Independent Auditors' Report........................................... F-36
Consolidated Balance Sheets............................................ F-37
Consolidated Statements of Operations.................................. F-38
Consolidated Statements of Stockholders' Equity........................ F-39
Consolidated Statements of Cash Flows.................................. F-40
Notes to Consolidated Financial Statements............................. F-41
CARON AUTO WORKS, INC. AND CARON AUTO BROKERS, INC.
Independent Auditors' Report........................................... F-48
Combined Balance Sheets................................................ F-49
Combined Statements of Operations...................................... F-50
Combined Statements of Stockholders' Equity............................ F-51
Combined Statements of Cash Flows...................................... F-52
Notes to Combined Financial Statements................................. F-53
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ABSOLUTE TOWING AND TRANSPORTING, INC.
Independent Auditors' Report............................................. F-59
Balance Sheets........................................................... F-60
Statements of Operations................................................. F-61
Statements of Stockholder's Equity....................................... F-62
Statements of Cash Flows................................................. F-63
Notes to Financial Statements............................................ F-64
KEYSTONE TOWING, INC.
Independent Auditors' Report............................................. F-68
Balance Sheets........................................................... F-69
Statements of Operations................................................. F-70
Statements of Stockholder's Equity....................................... F-71
Statements of Cash Flows................................................. F-72
Notes to Financial Statements............................................ F-73
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
Independent Auditors' Report............................................. F-78
Consolidated Balance Sheet............................................... F-79
Consolidated Statement of Operations..................................... F-80
Consolidated Statement of Stockholders' Deficit.......................... F-81
Consolidated Statement of Cash Flows..................................... F-82
Notes to Consolidated Financial Statements............................... F-83
</TABLE>
F-2
<PAGE>
UNITED ROAD SERVICES, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to the acquisitions by United Road Services of the outstanding capital stock
of Northland, Falcon, Caron, Quality, Absolute, Keystone, Auto Service and
Milne. These acquisitions will occur simultaneously with the closing of United
Road Services' initial public offering and will be accounted for using the
purchase method of accounting. United Road Services has been identified as the
accounting acquirer for financial statement presentation purposes.
The unaudited pro forma combined balance sheet gives effect to the
Acquisitions and the Offering as if they had occurred on December 31, 1997.
The unaudited pro forma combined statement of operations gives effect to these
transactions as if they had occurred on January 1, 1997.
To the extent the owners of the Founding Companies have contractually agreed
to reductions in salary, bonuses and benefits, these reductions have been
reflected in the unaudited pro forma combined statements of operations. With
respect to other potential cost savings, United Road Services has not and
cannot quantify these savings until completion of the Acquisitions. It is
anticipated that these savings will be offset in part by costs related to
United Road Services' new corporate management and by the costs associated
with being a public company. However, because these costs cannot be quantified
at this time, they have not been included in the unaudited pro forma combined
financial statements of the Company.
The pro forma adjustments are based on estimates, available information and
certain assumptions, and may be revised, as additional information becomes
available. The pro forma financial information does not purport to represent
what United Road Services' financial position or results of operations would
actually have been had such transactions occurred on these dates and are not
necessarily representative of United Road Services' financial position or
results of operations for any future period. Since the Founding Companies were
not under common control or management during the periods presented,
historical combined results may not be comparable to, or indicative of, future
performance. See "Risk Factors" included elsewhere herein. The unaudited pro
forma combined financial statements should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus.
F-3
<PAGE>
UNITED ROAD SERVICES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNITED PRO FORMA
ROAD ACQUISITION PRO FORMA
SERVICES NORTHLAND FALCON QUALITY CARON ABSOLUTE KEYSTONE ASC MILNE ADJUSTMENTS COMBINED
-------- --------- ------ ------- ----- -------- -------- ----- ----- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents...... $ 50 407 4 267 108 11 72 138 -- 585(a)(b) 1,642
Accounts
receivable....... -- 1,017 907 354 791 594 167 230 437 -- 4,497
Less: allowance. -- 75 189 76 45 -- -- -- 21 -- 406
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Accounts
receivable, net.. -- 942 718 278 746 594 167 230 416 -- 4,091
Accounts
receivable from
related parties
and employees.... -- 3 -- 72 57 -- 3 1 6 -- 142
Inventory........ -- -- 26 10 30 -- 61 18 17 -- 162
Notes
receivables...... -- 18 -- -- 44 -- 5 -- -- -- 67
Prepaid and other
current assets... -- 131 131 21 5 86 98 70 19 -- 561
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Total Current
Assets.......... 50 1,501 879 648 990 691 406 457 458 585 6,665
Property and
equipment, net... -- 3,924 2,423 2,877 2,279 306 1,039 807 715 1,893(b)(c) 16,263
Accounts
receivable--
related parties--
non-current...... -- -- -- 831 -- -- -- -- -- -- 831
Other non-current
assets, net...... -- 40 -- 99 23 31 82 10 -- -- 285
Goodwill......... -- -- -- -- -- -- -- -- -- 51,972(b)(c) 51,972
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Total Assets..... $ 50 5,465 3,302 4,455 3,292 1,028 1,527 1,274 1,173 54,450 76,016
===== ===== ===== ===== ===== ===== ===== ===== ===== ====== ======
LIABILITIES AND
STOCKHOLDERS' EQ-
UITY
Current
installment of
notes payable.... $ -- 347 264 542 263 16 279 20 170 -- 1,901
Current
installment of
lease
obligations...... -- 148 369 -- 178 -- -- 248 -- -- 943
Borrowings under
lines of credit.. -- -- 47 -- 225 212 73 -- -- -- 557
Payable to
related parties--
current.......... 92 54 -- -- 10 -- 76 -- -- -- 232
Accounts payable. 62 188 546 68 333 437 201 121 134 -- 2,090
Income taxes
payable.......... -- 262 207 345 92 -- -- 62 -- -- 968
Payable to
stockholders..... -- -- -- -- -- -- -- -- -- 32,340(c) 32,340
Other accrued
liabilities...... -- 103 283 89 88 -- 379 63 45 -- 1,050
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Total Current
Liabilities..... 154 1,102 1,716 1,044 1,189 665 1,008 514 349 32,340 40,081
Notes payable,
excluding current
installments..... -- 280 250 2,188 1,011 84 365 209 466 (203)(b) 4,650
Capital lease
obligations,
excluding current
installments..... -- 794 716 -- 438 -- -- 492 -- -- 2,440
Deferred income
taxes............ -- 244 11 313 54 -- -- 83 -- 1,077 (c) 1,782
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Total
Liabilities...... 154 2,420 2,693 3,545 2,692 749 1,373 1,298 815 33,214 48,953
Stockholders'
Equity:
Common stock.... 3 2 -- 20 2 43 20 24 25 (133)(a)(c) 6
Additional paid-
in capital...... 67 -- -- -- 10 -- -- 33 -- 27,121 (a)(b)(c) 27,231
Retained
earnings
(accumulated
deficit)........ (174) 3,043 609 890 618 236 134 (81) 333 (5,782)(c) (174)
Treasury stock.. -- -- -- -- (30) -- -- -- -- 30 (c) --
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Total
Stockholders'
Equity
(deficit)....... (104) 3,045 609 910 600 279 154 (24) 358 21,236 27,063
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Total Liabilities
and Stockholders'
Equity........... $ 50 5,465 3,302 4,455 3,292 1,028 1,527 1,274 1,173 54,450 76,016
===== ===== ===== ===== ===== ===== ===== ===== ===== ====== ======
<CAPTION>
PRO FORMA
POST COMBINED
ACQUISITION AS
ADJUSTMENTS ADJUSTED
--------------- ---------
<S> <C> <C>
ASSETS
Cash and cash
equivalents...... 28,040(d)(e) 29,682
Accounts
receivable....... -- 4,497
Less: allowance. -- 406
--------------- ---------
Accounts
receivable, net.. -- 4,091
Accounts
receivable from
related parties
and employees.... -- 142
Inventory........ -- 162
Notes
receivables...... -- 67
Prepaid and other
current assets... -- 561
--------------- ---------
Total Current
Assets.......... 28,040 34,705
Property and
equipment, net... -- 16,263
Accounts
receivable--
related parties--
non-current...... -- 831
Other non-current
assets, net...... -- 285
Goodwill......... 250(d) 52,222
--------------- ---------
Total Assets..... 28,290 104,306
=============== =========
LIABILITIES AND
STOCKHOLDERS' EQ-
UITY
Current
installment of
notes payable.... -- 1,901
Current
installment of
lease
obligations...... -- 943
Borrowings under
lines of credit.. -- 557
Payable to
related parties--
current.......... -- 232
Accounts payable. -- 2,090
Income taxes
payable.......... 968
Payable to
stockholders..... (32,340)(e) --
Other accrued
liabilities...... -- 1,050
--------------- ---------
Total Current
Liabilities..... (32,340) 7,741
Notes payable,
excluding current
installments..... -- 4,650
Capital lease
obligations,
excluding current
installments..... -- 2,440
Deferred income
taxes............ -- 1,782
--------------- ---------
Total
Liabilities...... (32,340) 16,613
Stockholders'
Equity:
Common stock.... 5 (d) 11
Additional paid-
in capital...... 60,625 (d) 87,856
Retained
earnings
(accumulated
deficit)........ -- (174)
Treasury stock.. -- --
--------------- ---------
Total
Stockholders'
Equity
(deficit)....... 60,630 87,693
--------------- ---------
Total Liabilities
and Stockholders'
Equity........... 28,290 104,306
=============== =========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements
F-4
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNITED PRO FORMA
ROAD ACQUISITION PRO FORMA
SERVICES NORTHLAND FALCON QUALITY CARON ABSOLUTE KEYSTONE ASC MILNE ADJUSTMENTS COMBINED
-------- --------- ------ ------- ----- -------- -------- ----- ----- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue....... $ -- 10,159 7,785 6,802 6,627 4,780 3,943 3,310 3,136 -- 46,542
Cost of revenue... -- 7,342 5,956 3,849 6,304 3,767 2,607 2,364 1,676 (601)(b) 33,264
----- ------ ----- ----- ----- ----- ----- ----- ----- ------ ------
Gross profit..... -- 2,817 1,829 2,953 323 1,013 1,336 946 1,460 601 13,278
Selling general
and administrative
expenses.......... 174 1,379 1,614 1,390 511 1,095 1,140 765 1,316 (2,901)(a) 6,483
Goodwill
amortization...... -- -- -- -- -- -- -- -- -- 1,306 (c) 1,306
----- ------ ----- ----- ----- ----- ----- ----- ----- ------ ------
Income (loss) from
operations........ (174) 1,438 215 1,563 (188) (82) 196 181 144 2,196 5,489
Other income
(expense):
Interest expense. -- (139) (148) (277) (141) (15) (71) (72) (43) -- (906)
Interest income.. -- 36 -- 4 8 -- 2 -- -- -- 50
Gain (loss) on
sale of assets... -- (35) 99 -- 115 9 36 19 -- -- 243
Other............ -- 89 74 (27) 30 -- 76 35 -- -- 277
----- ------ ----- ----- ----- ----- ----- ----- ----- ------ ------
Income (loss)
before income
taxes............. (174) 1,389 240 1,263 (176) (88) 239 163 101 2,196 5,153
Income tax expense
(benefit)......... 335 108 441 (95) (24) -- 49 12 1,591 (a)(b)(c)(d) 2,417
----- ------ ----- ----- ----- ----- ----- ----- ----- ------ ------
Net income (loss). $(174) 1,054 132 822 (81) (64) 239 114 89 605 2,736
===== ====== ===== ===== ===== ===== ===== ===== ===== ====== ======
Basic earnings per
share (e)......... -- -- -- -- -- -- -- -- -- -- $ 0.32
======
Diluted earnings
per share (e)..... -- -- -- -- -- -- -- -- -- -- $ 0.32
======
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements
F-5
<PAGE>
UNITED ROAD SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. GENERAL:
United Road Services was founded to become a leading national provider of
motor vehicle and equipment towing and transport services. United Road
Services has conducted no operations to date and will acquire the Founding
Companies simultaneously with and as a condition to the consummation of the
Offering.
The historical financial statements reflect the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements included elsewhere herein,
except for those of Milne, which are compiled from Milne's accounting records.
The information included in these financial statements for the individual
Founding Companies is as of and for the year ended December 31, 1997, with the
exception of Caron for which the information is as of and for the fiscal year
ended September 30, 1997.
2. ACQUISITION OF FOUNDING COMPANIES:
Simultaneously with and as a condition to consummation of the Offering,
United Road Services will acquire by merger all of the Founding Companies. The
acquisitions will be accounted for using the purchase method of accounting
with United Road Services being treated as the accounting acquirer.
The following table sets forth the consideration to be paid in cash and in
shares of Common Stock to the stockholders of each of the Founding Companies
(without giving effect to any earn-out payments that may be required or any
indebtedness of the Founding Companies that may be assumed by the Company).
For purposes of computing the estimated purchase price for accounting
purposes, the value of the shares of Common Stock was determined using an
estimated fair value of $9.60 per share (or $26.5 million), which represents a
discount of 20% from the assumed initial public offering price of $12.00 due
to restrictions on the sale and transferability of the shares issued. The
total estimated purchase price of $58.8 million for the Acquisitions is based
upon preliminary estimates and is subject to certain purchase price
adjustments at and following closing of the Acquisitions.
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Northland.......................................... $ 8,307 692,277
Falcon............................................. 4,282 356,850
Quality............................................ 5,129 485,750
Caron.............................................. 3,000 250,000
Absolute........................................... 3,567 297,267
Keystone........................................... 4,531 377,624
Auto Service....................................... 1,651 137,554
Milne.............................................. 1,873 156,043
---------- ------------
Total............................................ $32,340 2,753,365
========== ============
</TABLE>
F-6
<PAGE>
UNITED ROAD SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(a) Reflects the sale of Common Stock in January 1998.
(b) Reflects the distribution to stockholders of three Founding Companies of
certain assets and liabilities that are specifically excluded from the
transactions.
(c) Reflects the acquisition of the Founding Companies by United Road
Services for a total estimated purchase price of $58.8 million consisting of
$32.3 million in cash and 2,753,365 shares of Common Stock valued at $9.60 per
share (or $26.5 million). The purchase price less the net assets acquired,
including an adjustment for property and equipment to fair market value,
including the resulting tax effect, results in excess purchase price of $52.0
million. In connection with the Acquisitions, the Company has agreed to make
contingent payments, if earned, to the former stockholders of the Founding
Companies over a five year period based on formulas in their respective
agreements. These payments will be made with shares of Common Stock. Amounts
earned under the agreements will be recorded as additional goodwill and
amortized over the remaining amortization period.
(d) Reflects the cash proceeds of $60.4 million from the issuance of
5,500,000 shares of United Road Services Common Stock, net of estimated
offering costs of $5.4 million (based on an assumed initial public offering
price of $12.00 per share) and acquisition costs of $250,000. Offering costs
consist primarily of underwriting discounts and commissions, accounting fees,
legal fees and printing expenses. Acquisition costs consist primarily of
allocated legal fees.
(e) Reflects the cash portion of the consideration to be paid to the
stockholders of the Founding Companies in connection with the Acquisitions.
4. UNAUDITED PROFORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS:
(a) Reflects $2.9 million of reductions in salaries, bonuses and benefits to
the former stockholders of the Founding Companies to which they have
contractually agreed.
(b) Adjusts the depreciation of vehicles based upon adjusted carrying values
utilizing lives of 10 to 15 years.
(c) Reflects the amortization over a 40-year estimated life of goodwill to
be recorded as a result of the Acquisitions, which is non-deductible for tax
purposes.
(d) Reflects the incremental provision for federal and state income taxes
relating to all entities being combined and other statements of operations
adjustments at an estimated rate of 38%.
(e) The number of shares used in the calculations of basic and diluted
earnings per share have been derived as follows:
<TABLE>
<S> <C>
Shares issued in connection with the formation of the Company...... 2,604,000
Shares issued in the Offering...................................... 2,987,489
Shares issued in January 1998...................................... 218,736
Shares issued in connection with the Acquisitions.................. 2,753,365
---------
Basic shares estimated to be outstanding........................... 8,563,590
Incremental effect of options and warrants on shares outstanding... 54,000
---------
Diluted shares estimated to be outstanding......................... 8,617,590
=========
</TABLE>
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
United Road Services, Inc.:
We have audited the accompanying balance sheet of United Road Services, Inc.
as of December 31, 1997, and the related statement of operations,
stockholders' equity (deficit), and cash flows for the period from July 25,
1997 (inception) through December 31, 1997. These financial statements are the
responsibility of United Road Services, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United Road Services, Inc.
as of December 31, 1997, and the results of its operations and its cash flows
for the period from July 25, 1997 (inception) through December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
February 24, 1998
F-8
<PAGE>
UNITED ROAD SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash.............................................................. $ 49,987
---------
Total assets.................................................... $ 49,987
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Payable to related parties (note 3)............................... 91,874
Accounts payable.................................................. 62,077
---------
Total current liabilities....................................... 153,951
---------
Stockholders' equity (deficit):
Common stock, $.001 par value. Authorized 35,000,000 common shares
and 5,000,000 preferred shares; issued and outstanding 2,604,000
shares........................................................... 2,604
Additional paid-in capital........................................ 67,396
Accumulated deficit............................................... (173,964)
---------
Total stockholders' equity (deficit)............................ (103,964)
---------
Total liabilities and stockholders' equity (deficit)............ $ 49,987
=========
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE>
UNITED ROAD SERVICES, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 25, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
Revenue............................................................. $ --
Selling, general and administrative expenses........................ 173,964
---------
Loss before income tax.......................................... (173,964)
Income tax benefit.................................................. --
---------
Net loss........................................................ $(173,964)
=========
Net loss per share (note 2)..................................... $ (.08)
=========
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
UNITED ROAD SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JULY 25, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY (DEFICIT)
------ ---------- ----------- ----------------
<S> <C> <C> <C> <C>
Initial capitalization........... $2,604 67,396 -- 70,000
Net loss--1997................... -- -- (173,964) (173,964)
------ ------ -------- --------
Balance at December 31, 1997..... $2,604 67,396 (173,964) (103,964)
====== ====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
UNITED ROAD SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 25, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.......................................................... $(173,964)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Increase in accounts payable.................................... 62,077
Increase in amounts payable to related parties.................. 91,874
---------
Net cash used by operating activities......................... (20,013)
---------
Cash flows from financing activities:
Proceeds from issuance of stock................................... 70,000
---------
Net cash provided by financing activities..................... 70,000
Net increase in cash................................................ 49,987
Cash at beginning of period......................................... --
---------
Cash at end of period............................................... $ 49,987
=========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
United Road Services, Inc. (formerly Towing America, Inc.), a Delaware
corporation was formed in July 1997 to become a leading national provider of
motor vehicles and equipment towing and transport services. United Road
Services, Inc. elected to incorporate under the S-corporation provisions of
the Internal Revenue Code. It is United Road Services, Inc.'s intention to
change its status to a C-corporation effective January 1, 1998. United Road
Services, Inc. intends to acquire eight businesses, (the "Acquisitions"),
simultaneously with the consummation of an initial public offering
("Offering") of its common stock and, subsequent to the Offering, continue to
acquire similar companies to expand its national operations.
All of United Road Services, Inc.'s activities to date relate to the
Offering and the Acquisitions. United Road Services, Inc. has not yet
conducted any operations relative to its ultimate intended purpose. United
Road Services, Inc. is dependent upon the Offering to execute the pending
Acquisitions. There is no assurance that the pending Acquisitions discussed
below will be completed or that United Road Services, Inc. will be able to
generate future operating revenue. United Road Services, Inc. has an absence
of a combined operating history and future success is dependent upon a number
of factors which include, among others, the ability to integrate operations,
reliance on the identification and integration of satisfactory acquisition
candidates, reliance on acquisition financing, the ability to manage growth
and attract and retain quality management.
(b) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments the fair value
of United Road Services, Inc.'s financial instruments approximates their
carrying values.
(c) Use of Estimates
Management of United Road Services, Inc. has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(d) Income Taxes
United Road Services, Inc. elected to file federal and State income tax
returns under S-corporation provisions. As such, earnings or losses flow
through to the stockholder level. Accordingly, no income tax expense or
benefit has been recorded by United Road Services, Inc. as of December 31,
1997.
(2) STOCKHOLDER'S EQUITY AND EARNINGS (LOSS) PER SHARE
United Road Services, Inc. effected a 100-for-one stock split on December
18, 1997 for each share of common stock of United Road Services, Inc. ("Common
Stock") then outstanding. In addition United Road Services, Inc. increased
authorized shares of Common Stock to 1,000,000 shares with a $.001 par value.
Subsequently, and pursuant to an amended and restated certificate of
incorporation of United Road Services, Inc., filed on February 23, 1998, the
authorized number of shares have been increased to 40,000,000 (35,000,000
common shares and 5,000,000 preferred shares). Also on February 23, 1998,
United Road Services, Inc. effected a 3.72 for 1 stock split for all
outstanding common shares. Common stock has been retroactively reflected in
the balance sheet, statement of stockholder's equity (deficit) and the
following notes.
F-13
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On December 18, 1997, United Road Services, Inc. authorized the issuance of
188,976 shares pursuant to the terms and conditions of a subscription
agreement. At December 31, 1997 United Road Services, Inc. had obtained
subscription agreements to purchase all authorized shares. These shares were
issued and fully paid on January 1, 1998 for $3.36 per share.
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding after giving effect to the stock-splits referred
to above. The weighted average number of shares used in the computation was
2,055,300.
(3) RELATED PARTY TRANSACTIONS
United Road Services, Inc. is indebted to two of the primary stockholders
under unsecured notes, bearing interest at 8.5% per annum. The notes and
unpaid interest are included in payable to related parties in the accompanying
balance sheet.
(4) SUBSEQUENT EVENTS
United Road Services, Inc. has signed definitive agreements to acquire eight
companies (Founding Companies) to be effective contemporaneously with the
Offering. The companies to be acquired are:
Northland Auto Transporters, Inc. and Northland Fleet Leasing, Inc.
Falcon Towing and Auto Delivery, Inc.,
Smith-Christensen Enterprises, Inc. and subsidiary ("City Towing, Inc."
d/b/a Quality Towing)
Caron Auto Works, Inc. and Caron Auto Brokers, Inc.
Absolute Towing and Transporting, Inc.
Keystone Towing, Inc.
ASC Transportation Services and subsidiary ("Auto Service Center" d/b/a ASC
Truck Service)
Milne Tow Service
The aggregate consideration to acquire the Founding Companies is
approximately $32.3 million in cash and 2,753,365 in shares of Common Stock.
United Road Services, Inc. expects to receive a commitment for a revolving
line of credit of $50 million. The funding is intended to be used for
acquisitions, capital expenditures, refinancing of debt not paid out of the
proceeds of the Offering and for general corporate purposes. The line of
credit is subject to the customary closing conditions and the completion of
the definitive documentation.
Concurrently with the Acquisitions, United Road Services, Inc. may enter
into an agreement with the stockholders to lease the building used in United
Road Services, Inc.'s operation for negotiated amounts and terms.
Prior to the Acquisitions, several Founding Companies intend to make
distributions of certain net assets not to exceed approximately $930,000.
In January 1998, United Road Services, Inc. issued 29,760 shares to a member
of the board of directors for a purchase price of $3.36 per share. In
addition, options to purchase 215,000 shares were issued during January and
February 1998 to several employees of United Road Services, Inc. and outside
consultants. Stock options were issued at a price of $9.00 per share and vest
over a three-year period. Additional options to purchase 40,000 shares are
expected to be issued after the consummation of the Offering at the Offering
price per share.
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholder
Northland Auto Transporters, Inc. and
Northland Fleet Leasing, Inc.:
We have audited the accompanying combined balance sheets of Northland Auto
Transporters, Inc. and Northland Fleet Leasing, Inc. (collectively
"Northland") as of December 31, 1996 and 1997, and the related combined
statements of operations, stockholder's equity, and cash flows for each of the
years in the three-year period ended December 31, 1997. These combined
financial statements are the responsibility of Northland's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Northland
Auto Transporters, Inc. and Northland Fleet Leasing, Inc. as of December 31,
1996 and 1997, and the results of their combined operations and their combined
cash flows for each of the years in the three-year period ended December 31,
1997 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
January 28, 1998
F-15
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
ASSETS ---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 432,949 $ 407,309
Trade accounts receivable, net of allowance for
doubtful accounts of $40,000 in 1996 and $75,000 in
1997.................................................. 416,220 942,432
Accounts receivable from employees..................... 4,955 3,445
Notes receivable....................................... 35,068 17,453
Income tax receivable (note 7)......................... 37,584 --
Prepaid and other current assets (note 2).............. 74,302 113,558
Deferred income taxes (note 7)......................... 9,000 17,000
---------- ----------
Total current assets................................. 1,010,078 1,501,197
Property and equipment, net (notes 3, 5 and 6)........... 2,204,802 3,924,055
Notes receivable......................................... 44,044 31,468
Other assets............................................. 8,862 8,426
---------- ----------
Total assets......................................... $3,267,786 $5,465,146
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current installments of notes payable (note 5)......... $ 282,824 $ 346,859
Current installments of obligations under capital
leases (note 6)....................................... 4,408 147,538
Payable to related parties (note 10)................... 159,505 53,849
Accounts payable....................................... 210,998 188,064
Income taxes payable (note 7).......................... -- 261,933
Accrued payroll and related costs...................... 18,062 52,676
Other accrued liabilities (note 4)..................... 98,914 51,300
---------- ----------
Total current liabilities............................ 774,711 1,102,219
Long-term liabilities:
Notes payable, excluding current installments (note 5). 318,382 279,963
Obligations under capital leases, excluding current
installments (note 6)................................. 12,833 793,774
Deferred income taxes (note 7)......................... 171,000 244,000
---------- ----------
Total liabilities.................................... 1,276,926 2,419,956
---------- ----------
Stockholder's equity:
Common stock, $1 par value. Authorized, issued and
outstanding 2,000 shares in 1996 and 1997............. 2,000 2,000
Retained earnings...................................... 1,988,860 3,043,190
---------- ----------
Total stockholder's equity........................... 1,990,860 3,045,190
---------- ----------
Total liabilities and stockholder's equity........... $3,267,786 $5,465,146
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-16
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Net revenue............................... $4,671,164 $6,353,290 $10,159,113
Cost of revenue........................... 3,683,119 5,132,828 7,341,748
---------- ---------- -----------
Gross profit.......................... 988,045 1,220,462 2,817,365
Selling, general and administrative
expenses................................. 663,723 874,559 1,378,872
---------- ---------- -----------
Income from operations................ 324,322 345,903 1,438,493
---------- ---------- -----------
Other income (expense):
Interest expense........................ (48,825) (79,384) (139,099)
Interest income......................... 16,624 37,701 35,723
Gain (loss) on sale of assets........... (14,540) -- (34,568)
Other................................... 29,078 41,282 88,781
---------- ---------- -----------
Income before income taxes............ 306,659 345,502 1,389,330
Income tax expense (benefit) (note 7)..... 31,400 (710) 335,000
---------- ---------- -----------
Net income............................ $ 275,259 $ 346,212 $ 1,054,330
========== ========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-17
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDER'S
STOCK EARNINGS EQUITY
------ ---------- -------------
<S> <C> <C> <C>
Balance at December 31, 1994.................... $2,000 $1,367,389 $1,369,389
Net income--1995................................ -- 275,259 275,259
------ ---------- ----------
Balance at December 31, 1995.................... 2,000 1,642,648 1,644,648
Net income--1996................................ -- 346,212 346,212
------ ---------- ----------
Balance at December 31, 1996.................... 2,000 1,988,860 1,990,860
Net income--1997................................ -- 1,054,330 1,054,330
------ ---------- ----------
Balance at December 31, 1997.................... $2,000 $3,043,190 $3,045,190
====== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-18
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................. $ 275,259 $ 346,212 $1,054,330
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 181,634 224,637 289,479
Deferred income taxes.................... (11,000) (6,000) 65,000
Loss on sale of property and equipment... 14,540 -- 34,568
(Increase) decrease in trade accounts
receivable.............................. (115,982) 138,452 (526,212)
Decrease (increase) in accounts
receivable from employees............... 1,185 (4,100) 1,510
Decrease in income tax receivable........ -- -- 37,584
(Increase) decrease in prepaid and other
current assets.......................... (17,892) 16,331 (39,256)
Increase (decrease) in accounts payable.. 716 23,236 (22,934)
Increase in income taxes payable......... -- -- 261,933
Increase (decrease) in accrued payroll
and related costs....................... (85,348) (14,137) 34,614
(Decrease) increase in amounts payable to
related parties......................... 20,552 16,410 (105,656)
(Decrease) in other accrued liabilities.. 25,946 2,880 (47,614)
--------- --------- ----------
Net cash provided by operating
activities............................ 289,610 743,921 1,037,346
--------- --------- ----------
Cash flows from investing activities:
Purchases of property and equipment........ (229,888) (395,881) (762,597)
Proceeds from sale of equipment............ 53,044 -- 67,656
Decrease in notes receivable............... 8,159 (30,984) 30,191
--------- --------- ----------
Net cash used in investing activities.. (168,685) (426,865) (664,750)
--------- --------- ----------
Cash flows from financing activities:
Proceeds from long-term debt............... -- -- 24,629
Principal payments on long-term debt....... (139,745) (156,620) (317,543)
Principal payments on obligations under
capital leases............................ -- (1,351) (105,322)
--------- --------- ----------
Net cash used in financing activities.. (139,745) (157,971) (398,236)
--------- --------- ----------
Net (decrease) increase in cash........ (18,820) 159,085 (25,640)
Cash and cash equivalents at beginning of
year........................................ 292,684 273,864 432,949
--------- --------- ----------
Cash and cash equivalents at end of year..... $ 273,864 $ 432,949 $ 407,309
========= ========= ==========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest................................. $ 48,825 $ 79,384 $ 139,099
========= ========= ==========
Income taxes............................. $ 7,024 $ 79,835 $ 6,480
========= ========= ==========
</TABLE>
See accompanying notes to combined financial statements.
F-19
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Northland Auto Transporters, Inc. and Northland Fleet Leasing, Inc.
(referred to collectively as "Northland") was founded in 1977. Northland's
primary business is transporting vehicles for auto auctions, leasing
companies, auto dealers, manufacturers and individuals, primarily in the
Midwestern United States. Northland has three facilities in Detroit. It
operates approximately 55 vehicles. Northland Fleet Leasing, Inc. owns a fleet
of trucks and trailers and contracts out work primarily with Northland Auto
Transporters, Inc., and to a limited extent, third party contractors.
(b) Principles of Combination
The combined financial statements include the financial statements of
Northland Auto Transporters, Inc., the auto hauling company, and Northland
Fleet Leasing, Inc., a truck leasing company. Northland Auto Transporters,
Inc. is a C-corporation while Northland Fleet Leasing, Inc. is an S-
corporation. All sales relating to intercompany leasing arrangements have been
eliminated. Both entities have the same management and principal stockholder
ownership.
(c) Revenue Recognition
Northland operates as one segment related to the transportation of vehicles
and equipment for customers.
Northland's revenue is derived from customers who require transportation of
vehicles and equipment. Transport revenue is recognized upon the delivery of
the vehicles to their final destination. Expenses related to the generation of
revenue are recognized as incurred.
(d) Cash and Cash Equivalents
Cash and cash equivalents of and $432,949 and $407,309 at December 31, 1996
and 1997, respectively, consist of bank accounts and certificates of deposit
with an initial term of less than three months. For purposes of the statements
of cash flows, Northland considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents.
(e) Property and Equipment
Property and equipment are stated at cost. Plant and equipment under capital
leases are stated at the present value of minimum lease payments. Depreciation
is determined for financial statement purposes using the straight-line method
over the estimated useful lives of the individual assets. Accelerated methods
of depreciation have been used for income tax purposes. For financial
statement purposes, Northland provides for depreciation of property and
equipment over the following estimated useful lives.
<TABLE>
<S> <C>
Transportation equipment....................................... 10-20 years
Furniture and Fixtures......................................... 7 years
Office Equipment............................................... 5 years
Automobiles.................................................... 5 years
</TABLE>
F-20
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(f) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to Northland on bank loans with
similar terms and maturities, the fair value of Northland's financial
instruments approximates their carrying values.
(g) Income Taxes
Income taxes are accounted for under the asset and liability method for
Northland Auto Transporters, Inc. 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, and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted 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 of a change in tax rates is recognized in income in the period
that includes the enactment date.
Northland Fleet Leasing, Inc. is a subchapter S-corporation. As such, all
taxable events are recorded by the stockholder's currently on his personal tax
returns.
(h) Use of Estimates
Management of Northland has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets at December 31, 1996 and 1997 consists of:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Prepaid insurance......................................... $14,818 $ 28,172
Prepaid vehicle registration.............................. 25,978 35,778
Deposits on trucks........................................ 12,403 16,633
Miscellaneous advances.................................... 12,716 9,320
Prepaid property and other taxes.......................... 8,387 23,655
------- --------
$74,302 $113,558
======= ========
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Transportation equipment........................... $2,745,094 $4,457,178
Furniture and fixtures............................. 123,585 147,035
Office equipment................................... 34,449 34,244
Automobiles........................................ 64,781 126,926
---------- ----------
Total............................................ 2,967,909 4,765,383
Less accumulated depreciation and amortization..... (763,107) (841,328)
---------- ----------
$2,204,802 $3,924,055
========== ==========
</TABLE>
Depreciation of property and equipment in 1995, 1996 and 1997 totaled
$181,198, $224,201 and $289,043, respectively.
F-21
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(4) OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 1996 and 1997 consists of:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Accrued highway use tax.................................... $ 9,487 $14,300
Accrued insurance.......................................... 12,324 6,880
Accrued profit sharing..................................... 64,196 --
Other...................................................... 12,907 30,120
------- -------
$98,914 $51,300
======= =======
</TABLE>
(5) INDEBTEDNESS
Northland's long-term debt consisted of the following at December 31, 1996
and 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Note payable to Navistar Financial Corp., payable in
monthly installments of $1,188, including interest at
8.755%, maturing June 2000. Secured by equipment. ... $ 43,095 $ 31,081
Note payable to First of America Bank, payable in
monthly installments of $11,029, including interest
at 8.25%, maturing May 1999. Secured by equipment. .. 288,698 176,248
Note payable to First of America Bank, payable in
monthly principal installments of $7,320, plus
interest at .75% above the prime lending rate (9.0%
and 9.25% at December 31, 1996 and 1997,
respectively), maturing July 1998. Secured by
equipment. .......................................... 141,143 49,628
Note payable to First of America Bank, payable in
monthly installments of $6,290, including interest at
8.25%, maturing October 1998. Secured by equipment. . 128,270 60,948
Note payable to First of America Bank, payable in
monthly principal installments of $6,771, including
interest at the Bank's base lending rate (8.50% at
December 31, 1997), maturing April 10, 2001. secured
by equipment. ....................................... -- 288,656
Various notes payable secured by equipment............ -- 20,261
--------- ---------
Total long-term debt................................ 601,206 626,822
Less installments due within one year................. (282,824) (346,859)
--------- ---------
Long-term debt, excluding current installments...... $ 318,382 $ 279,963
========= =========
</TABLE>
Annual maturities of long-term debt for the next four years are as follows:
<TABLE>
<S> <C>
1998.............................................................. $346,859
1999.............................................................. 147,902
2000.............................................................. 87,161
2001.............................................................. 44,900
--------
$626,822
========
</TABLE>
F-22
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(6) LEASES
Northland leases equipment under capital leases which expire in stages from
August 2000 to July 2002.
Northland leases its operating facility from a third party under a
cancelable operating lease. Rent expense in 1995, 1996 and 1997 was $40,054,
$58,515 and $41,700, respectively.
Following is a summary of transportation equipment held under capital leases
at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- ----------
<S> <C> <C>
Transportation equipment.............................. $18,000 $1,047,298
Less accumulated amortization......................... (3,600) (298,619)
------- ----------
$14,400 $ 748,679
======= ==========
</TABLE>
Future minimum capital lease payments as of December 31, 1997 are:
<TABLE>
<CAPTION>
CAPITAL
YEAR ENDING DECEMBER 31, LEASES
------------------------ ----------
<S> <C>
1998........................................................... $ 213,228
1999........................................................... 216,655
2000........................................................... 214,758
2001........................................................... 210,973
2002........................................................... 298,065
----------
Total........................................................ 1,153,679
Less amount representing interest.............................. (212,367)
----------
Present value of net minimum capital lease payments............ $ 941,312
==========
</TABLE>
(7) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1995, 1996 and
1997 consists of:
<TABLE>
<CAPTION>
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
Current:
Federal...................................... $ 42,400 $ 5,290 $270,000
Deferred....................................... (11,000) (6,000) 65,000
-------- ------- --------
$ 31,400 $ (710) $335,000
======== ======= ========
</TABLE>
The following table reconciles the expected tax expense at the Federal
statutory tax rate to the effective tax rate.
<TABLE>
<CAPTION>
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Computed expected tax expense............. $104,264 $ 117,471 $ 472,372
Effect of earnings from S-corporation..... (77,750) (123,441) (141,644)
Non-deductible meals and entertainment
expenses................................. 4,886 5,260 4,272
-------- --------- ---------
$ 31,400 $ (710) $ 335,000
======== ========= =========
</TABLE>
F-23
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities as of December 31, 1996 and 1997 are
presented below:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................... $ 9,000 $ 17,000
Deferred tax liabilities:
Property and equipment, due to differences in
depreciation lives and methods................... (171,000) (244,000)
--------- ---------
Net deferred tax liability...................... $(162,000) $(227,000)
========= =========
</TABLE>
At December 31, 1995, the net deferred tax liability was $168,000.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning strategies, as
well as carryback opportunities, in making this assessment. Based upon the
level of historical taxable income, projections for future taxable income and
carryback opportunities over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not Northland will
realize the benefits of these deductible differences. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income are reduced.
(8) NON-CASH TRANSACTIONS
During 1995, 1996 and 1997, Northland leased transportation equipment
totaling $200,000, $360,523 and, $1,347,923 respectively, through capital
leases with several lending institutions.
(9) EMPLOYEE BENEFITS
Northland has a retirement savings plan pursuant to section 401(k) of the
Internal Revenue Code that is available to all employees with at least one
year of service to Northland and that are at least 21 years of age. Eligible
participants may contribute up to 15% of their compensation. Northland
provides discretionary matching contributions to the Plan which amounted to,
$12,985, $64,196 and $0 in 1995, 1996 and 1997, respectively.
(10) RELATED PARTY TRANSACTIONS
Northland has borrowed funds from its principal stockholder and has
outstanding notes payable as of December 31, 1996 and 1997 of $159,505 and
$53,849. Such amounts are included in notes payable on the combined balance
sheets. The notes accrue interest at 8%, compounded monthly.
(11) CONTINGENT LIABILITIES
Various legal claims arise against Northland during the normal course of
business. In the opinion of management, liabilities, if any, arising from
proceedings would not have a material effect on the financial statements.
(12) CONCENTRATION OF BUSINESS RISKS
Two customers accounted for 10.7% and 16.4% of Northland's sales in 1996 and
1997, respectively. The loss of one or both of these customers could
significantly effect the Northland's performance.
F-24
<PAGE>
NORTHLAND AUTO TRANSPORTERS, INC. AND
NORTHLAND FLEET LEASING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(13) ALLOWANCE FOR DOUBTFUL ACCOUNTS
During 1995, 1996 and 1997, Northland recorded provisions for the allowance
for doubtful accounts in the amounts of $32,000, $30,000 and $52,000,
respectively. During 1995, 1996 and 1997, Northland wrote-off an average of
$17,000 in each year.
(14) SUBSEQUENT EVENT
During February 1998, the stockholder entered into a definitive agreement to
sell Northland to United Road Services, Inc. The sales transaction, affected
through a combination of cash and common stock of United Road Services, Inc.,
is contingent and effective upon the initial public offering of the common
stock of United Road Services, Inc. The anticipated selling price of Northland
exceeds its net assets as of December 31, 1997.
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholder
Falcon Towing and Auto Delivery, Inc.:
We have audited the accompanying balance sheets of Falcon Towing and Auto
Delivery, Inc. ("Falcon") as of December 31, 1996 and 1997, and the related
statements of operations, stockholder's equity, and cash flows for each of the
years in the three-year period ended December 31, 1997. These financial
statements are the responsibility of Falcon's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Falcon Towing and Auto
Delivery, Inc. as of December 31, 1996 and 1997 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
January 17, 1998
F-26
<PAGE>
FALCON TOWING AND AUTO DELIVERY, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
ASSETS ---------- ----------
<S> <C> <C>
Current assets:
Cash................................................... $ 23,505 $ 3,527
Trade accounts receivable, net of allowance for
doubtful accounts of $67,650 in 1996 and $188,500 in
1997.................................................. 476,896 717,560
Inventories............................................ 24,868 26,068
Prepaid and other current assets (note 2).............. 46,537 131,328
---------- ----------
Total current assets................................. 571,806 878,483
Property and equipment, net (notes 3, 5 and 6)........... 1,656,635 2,423,368
---------- ----------
Total assets......................................... $2,228,441 $3,301,851
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current installments of long-term debt (note 5)........ $ 123,722 $ 264,081
Current installments of obligations under capital
leases (note 6)....................................... 252,527 368,590
Borrowings under lines of credit (note 5).............. 36,150 47,121
Accounts payable....................................... 178,357 546,301
Accrued payroll and related costs...................... 57,000 67,701
Income taxes payable (note 8).......................... 98,698 207,399
Other accrued liabilities (note 4)..................... 137,600 214,979
---------- ----------
Total current liabilities............................ 884,054 1,716,172
Long-term liabilities:
Long-term debt, excluding current installments (note
5).................................................... 225,386 250,196
Obligations under capital leases, excluding current
installments (note 6)................................. 630,677 716,288
Deferred income taxes (note 8)......................... 11,733 10,555
---------- ----------
Total liabilities.................................... 1,751,850 2,693,211
---------- ----------
Stockholder's equity:
Common stock, no par or stated value.
Authorized 1,000 shares; issued and outstanding 750
shares in 1996 and 1997............................... -- --
Retained earnings...................................... 476,591 608,640
---------- ----------
Total stockholder's equity........................... 476,591 608,640
---------- ----------
Total liabilities and stockholder's equity........... $2,228,441 $3,301,851
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE>
FALCON TOWING AND AUTO DELIVERY, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net revenue................................ $4,351,847 $6,203,104 $7,784,766
Cost of revenue............................ 3,492,248 4,638,239 5,955,423
---------- ---------- ----------
Gross profit........................... 859,599 1,564,865 1,829,343
Selling, general and administrative
expenses.................................. 952,260 1,190,631 1,614,386
---------- ---------- ----------
Income (loss) from operations.......... (92,661) 374,234 214,957
---------- ---------- ----------
Other income (expense):
Interest expense......................... (77,176) (129,150) (147,700)
Gain (loss) on sale of equipment......... (417) -- 98,735
Other.................................... 38,508 12,167 73,580
---------- ---------- ----------
Income (loss) before income taxes...... (131,746) 257,251 239,572
Income tax expense (note 8)................ 15,707 94,723 107,523
---------- ---------- ----------
Net income (loss)...................... $ (147,453) $ 162,528 $ 132,049
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE>
FALCON TOWING AND AUTO DELIVERY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDER'S
STOCK EARNINGS EQUITY
------ --------- -------------
<S> <C> <C> <C>
Balance at December 31, 1994.................... $-- $ 461,516 $ 461,516
Net loss--1995.................................. -- (147,453) (147,453)
---- --------- ---------
Balance at December 31, 1995.................... -- 314,063 314,063
Net income--1996................................ -- 162,528 162,528
---- --------- ---------
Balance at December 31, 1996.................... -- 476,591 476,591
Net income--1997................................ -- 132,049 132,049
---- --------- ---------
Balance at December 31, 1997.................... $-- $ 608,640 $ 608,640
==== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE>
FALCON TOWING AND AUTO DELIVERY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $(147,453) $ 162,528 $ 132,049
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............. 343,595 431,828 621,673
Deferred income taxes..................... 15,707 (3,975) (1,178)
(Gain) loss on sale of equipment.......... 417 -- (98,735)
Increase in trade accounts receivable..... (1,169) (236,557) (240,664)
Increase in inventories................... -- -- (1,200)
Increase in prepaid and other current
assets................................... (10,524) (9,236) (84,791)
Increase (decrease) in accounts payable... 104,440 (8,097) 367,944
Increase in accrued payroll and related
costs.................................... 71,443 53,937 10,701
Increase (decrease) in income taxes
payable.................................. (20,542) 98,698 108,701
Increase (decrease) in other accrued
liabilities.............................. 7,434 (12,591) 77,379
--------- --------- ---------
Net cash provided by operating
activities............................. 363,348 476,535 891,879
--------- --------- ---------
Cash flows used in investing activities:
Purchases of property and equipment......... (290,177) (169,861) (919,049)
Proceeds from sale of property and
equipment.................................. -- -- 141,100
--------- --------- ---------
Net cash used in investing activities... (290,177) (169,861) (777,949)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt................ 75,047 -- 384,609
Payments on notes payable and capital
leases..................................... (120,031) (282,833) (529,488)
Net borrowings under lines of credit........ (36,066) (2,784) 10,971
--------- --------- ---------
Net cash used in financing activities... (81,050) (285,617) (133,908)
--------- --------- ---------
Net (decrease) increase in cash............... (7,879) 21,057 (19,978)
Cash at beginning of year..................... 10,327 2,448 23,505
--------- --------- ---------
Cash at end of year........................... $ 2,448 $ 23,505 $ 3,527
========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest.................................... $ 74,280 $ 125,435 $ 144,806
========= ========= =========
Income taxes................................ $ -- 12,591 --
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE>
FALCON TOWING AND AUTO DELIVERY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Falcon Towing and Auto Delivery, Inc. ("Falcon") was founded in 1983.
Falcon's primary business is transporting vehicles for dealers, leasing
companies, auction companies and long-haul transporters in the Western United
States. Falcon has facilities in Los Angeles, San Francisco and Phoenix. It
operates approximately 50 vehicles.
(b) Revenue Recognition
Falcon operates as one segment related to the transportation of vehicles and
equipment for customers.
Falcon's revenue is derived from customers who require transport of vehicles
and equipment. Transport revenue is recognized upon the delivery of the
vehicles and equipment to their final destination. Expenses related to the
generation of revenue are recognized as incurred.
(c) Inventories
Inventories, which consist principally of replacement tires and truck parts,
are stated at the lower of cost or market.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is determined for
financial statement purposes using the straight-line method over the estimated
useful lives of the individual assets or, for leasehold improvements, over the
terms of the related leases if shorter. Accelerated methods of depreciation
have been used for income tax purposes. For financial statement purposes,
Falcon provides for depreciation of property and equipment over the following
estimated useful lives:
<TABLE>
<S> <C>
Transportation and towing equipment................................ 5 years
Machinery and equipment............................................ 5 years
Leasehold improvements............................................. 5 years
Furniture and fixtures............................................. 5 years
Office equipment................................................... 5 years
</TABLE>
(e) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to Falcon on bank loans with
similar terms and maturities, the fair value of Falcon's financial instruments
approximates their carrying values.
(f) Income Taxes
Income taxes are accounted for under the asset and liability method.
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, and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted 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 of a change in tax
rates is recognized in income in the period that includes the enactment date.
F-31
<PAGE>
FALCON TOWING AND AUTO DELIVERY INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(g) Use of Estimates
Management of Falcon has made a number of estimates and assumptions relating
to the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ
from those estimates.
(2) PREPAID EXPENSES
Prepaid and other current assets at December 31, 1996 and 1997 consists of:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Prepaid vehicle registration.............................. $ -- $ 64,790
Prepaid insurance......................................... 19,414 27,340
Other..................................................... 27,123 39,198
------- --------
$46,537 $131,328
======= ========
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Transportation and towing equipment.............. $ 2,970,070 $ 4,124,483
Machinery and equipment.......................... 70,296 104,411
Leasehold improvements........................... 26,489 43,653
Furniture and fixtures........................... 10,448 14,298
Office equipment................................. 19,225 19,225
Construction-in-progress......................... -- 33,000
----------- -----------
Total.......................................... 3,096,528 4,339,070
Less accumulated depreciation and amortization... (1,439,893) (1,915,702)
----------- -----------
$ 1,656,635 $ 2,423,368
=========== ===========
</TABLE>
Depreciation and amortization of property and equipment in 1995, 1996 and
1997 totaled $343,595, $431,828 and $621,673, respectively.
(4) OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 1996 and 1997 consists of:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Accrued insurance premiums............................... $ 20,248 $ 17,712
Accrued fuel expenses.................................... 31,827 80,055
Accrued commissions...................................... 43,000 51,000
Accrued vacation......................................... 18,000 21,000
Accrued 401(k) contributions............................. -- 17,983
Other.................................................... 24,525 27,229
-------- --------
$137,600 $214,979
======== ========
</TABLE>
F-32
<PAGE>
FALCON TOWING AND AUTO DELIVERY INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) INDEBTEDNESS
Falcon has available a $50,000 line of credit with $36,150 and $47,121
outstanding at December 31, 1996 and 1997, respectively, secured by the assets
of Falcon and a guarantee by Falcon's stockholder. Interest is payable at
11.5%.
Falcon's long-term debt at December 31, 1996 and 1997 consists of:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Notes payable to banks payable in monthly
installments ranging from $1,024 to $2,909,
including interest ranging from 9.0% to 10.5%, and
maturing at dates ranging from April, 1998 to
April, 2000. Secured by vehicles and equipment. .. $ 349,108 $ 514,277
Less installments due within one year.............. (123,722) (264,081)
--------- ---------
Long-term debt, excluding current installments..... $ 225,386 $ 250,196
========= =========
</TABLE>
The aggregate maturities of long-term debt subsequent to December 31, 1997
are as follows:
<TABLE>
<S> <C>
1998.............................................................. $264,081
1999.............................................................. 166,798
2000.............................................................. 83,398
--------
$514,277
========
</TABLE>
(6) LEASES
Falcon is the lessee of vehicles under a number of capital leases which
expire in stages from April 1999 to November 2000.
Following is a summary of equipment held under capital leases at December
31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Transportation and towing equipment............... $1,612,687 $ 2,124,409
Less accumulated amortization..................... (703,928) (1,036,670)
---------- -----------
$ 908,759 $ 1,087,739
========== ===========
</TABLE>
Falcon leases the land and buildings used for its operations at the El Monte
and Phoenix locations under lease agreements with its sole stockholder. These
agreements provide for annual rental payments of $288,000 beginning December
1996 and $37,000 beginning March 1997 at the El Monte and Phoenix locations,
respectively. Rent paid to the stockholder in 1995, 1996 and 1997 was $0,
$24,000 and $319,000, respectively. Additionally, Falcon has a cancelable
lease for the land and building used for its operations at the Newark, CA
location from an unrelated third party for annual rental payments of
approximately $48,000. The leases are classified as operating leases. Falcon
is responsible for all operating costs related to the properties.
Total rent expense for 1995, 1996 and 1997 was $240,003, $265,103 and
$438,003, respectively.
F-33
<PAGE>
FALCON TOWING AND AUTO DELIVERY INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancellable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1997 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ ---------- ----------
<S> <C> <C>
1998............................................... $ 473,698 $ 325,000
1999............................................... 400,408 325,000
2000............................................... 254,520 325,000
2001............................................... 14,112 277,000
2002............................................... -- 3,100
---------- ----------
Total............................................ 1,142,738 $1,255,100
==========
Less amount representing interest.................. (57,860)
----------
Present value of net minimum capital lease
payments........................................ $1,084,878
==========
</TABLE>
(7) NON-CASH TRANSACTIONS
During 1995, 1996 and 1997, Falcon financed certain purchases of vehicles
and equipment totaling $571,137, $671,086 and $511,722, respectively.
(8) INCOME TAXES
Income tax expense for the years ended December 31, 1995, 1996 and 1997
consists of:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Current:
Federal....................................... $ -- $77,500 $ 86,271
State......................................... -- 21,198 22,430
------- ------- --------
-- 98,698 108,701
Deferred........................................ 15,707 (3,975) (1,178)
------- ------- --------
$15,707 $94,723 $107,523
======= ======= ========
</TABLE>
The following table reconciles the expected tax expense at the Federal
statutory tax rate to the effective tax rate.
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Computed expected tax (benefit) expense...... $(44,794) $ 87,465 $ 81,454
State income taxes (benefit), net of Federal
benefit..................................... (8,087) 13,991 14,803
Non-deductible meals and entertainment
expenses.................................... 1,428 354 2,116
Tax penalties and disallowances.............. -- 5,724 3,898
Net operating loss carryforward for which no
benefit will be derived..................... 73,039 -- --
Basis difference in fixed assets which will
not result in a tax benefit or loss......... (5,879) (12,811) 5,252
-------- -------- --------
$ 15,707 $ 94,723 $107,523
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
liabilities as of December 31, 1995, 1996 and 1997 relate to fixed assets
caused by differences in depreciation lives and methods and total $15,707,
$11,733 and $10,555, respectively.
F-34
<PAGE>
FALCON TOWING AND AUTO DELIVERY INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(9) EMPLOYEE BENEFITS
Falcon has a retirement savings plan pursuant to section 401(k) of the
Internal Revenue Code that is available to all employees with at least one
year of service to Falcon and that are at least twenty-one years of age.
Falcon provides matching funds of 25% of eligible contributions to the Plan
which amounted to $0, $0 and $18,000 in 1995, 1996 and 1997, respectively.
(10) RELATED PARTY TRANSACTIONS
Falcon leases land and buildings, located at the El Monte and Phoenix
locations, from the sole stockholder (see note 6).
(11) SUBSEQUENT EVENT
During February 1998, the stockholder entered into a definitive agreement to
sell Falcon to United Road Services, Inc. The sales transaction, affected
through a combination of cash and common stock of United Road Services, Inc.,
is contingent and effective upon the initial public offering of the common
stock of United Road Services, Inc. The anticipated selling price of Falcon
exceeds its net assets as of December 31, 1997.
Concurrently with the acquisition, United Road Services, Inc. will enter
into agreements with the stockholder to lease land and buildings used in
Falcon's operations for negotiated amounts and terms.
F-35
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders
Smith-Christensen Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Smith-
Christensen Enterprises, Inc. and subsidiary (City Towing, Inc. d/b/a Quality
Towing) ("Quality") as of January 31, 1997 and December 31, 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years ended January 31, 1996 and 1997 and for the
twelve-month period ended December 31, 1997. These consolidated financial
statements are the responsibility of Quality's management. Our responsibility
is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Smith-Christensen
Enterprises, Inc. and subsidiary (City Towing, Inc. d/b/a Quality Towing) as
of January 31, 1997 and December 31, 1997, and the results of their operations
and their cash flows for each of the years ended January 31, 1996 and 1997 and
for the twelve-month period ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
January 16, 1998
F-36
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1997 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1997 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 180,269 266,687
Trade accounts receivable, net of allowance for
doubtful accounts of $26,850 and $75,850 at January
31, 1997 and December 31, 1997, respectively....... 88,518 277,966
Accounts receivable from related parties (note 9)... 10,665 50,151
Due from employees.................................. 19,124 22,053
Inventories......................................... 20,661 9,950
Prepaid expenses (note 2)........................... 30,048 19,680
Other current assets................................ 900 900
---------- ---------
Total current assets.............................. 350,185 647,387
Property, plant and equipment, net (notes 3 and 5).... 2,653,243 2,877,229
Accounts receivable from related parties (note 9)..... 157,294 831,733
Other assets, net (note 4)............................ 118,908 98,905
---------- ---------
Total assets...................................... $3,279,630 4,455,254
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 5)..... $ 447,875 541,836
Accounts payable.................................... 38,278 68,203
Accrued payroll and related costs................... 28,757 85,563
Income taxes payable (note 7)....................... 60,863 345,339
Other accrued expenses.............................. 5,305 3,110
---------- ---------
Total current liabilities......................... 581,078 1,044,051
---------- ---------
Long-term liabilities:
Long-term debt, excluding current installments (note
5)................................................. 2,415,340 2,188,038
Deferred income taxes (note 7)...................... 193,379 312,721
---------- ---------
Total liabilities................................. 3,189,797 3,544,810
---------- ---------
Stockholders' equity:
Common stock, no par value.
Authorized 2,500 shares; issued and outstanding
2,425 shares....................................... 20,000 20,000
Retained earnings................................... 69,833 890,444
---------- ---------
Total stockholders' equity........................ 89,833 910,444
---------- ---------
Total liabilities and stockholders' equity........ $3,279,630 4,455,254
========== =========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-37
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THE YEARS ENDED JANUARY 31, 1996 AND 1997 AND THE
TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
TWELVE-MONTH
PERIOD ENDED
YEAR ENDED YEAR ENDED DECEMBER 31, 1997
JANUARY 31, 1996 JANUARY 31, 1997 (NOTE 1(B))
---------------- ---------------- -----------------
<S> <C> <C> <C>
Net revenue................ $4,395,762 $5,395,475 $6,802,474
Cost of revenue............ 2,579,463 3,214,772 3,849,138
---------- ---------- ----------
Gross profit........... 1,816,299 2,180,703 2,953,336
Selling, general and
administrative expenses... 1,436,488 1,194,716 1,389,707
---------- ---------- ----------
Income from operations. 379,811 985,987 1,563,629
---------- ---------- ----------
Other income (expense):
Interest expense......... (258,554) (325,370) (277,436)
Interest income.......... -- -- 4,524
Other.................... (25,005) 131,721 (27,375)
---------- ---------- ----------
Income before income
taxes................. 96,252 792,338 1,263,342
Income tax expense (note
7)........................ 103,752 277,623 440,978
---------- ---------- ----------
Net income (loss)...... $ (7,500) $ 514,715 $ 822,364
========== ========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-38
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THE YEARS ENDED JANUARY 31, 1996 AND 1997 AND THE
TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
TOTAL
RETAINED STOCKHOLDERS'
COMMON EARNINGS EQUITY
STOCK (DEFICIT) (DEFICIT)
------- --------- -------------
<S> <C> <C> <C>
Balance at January 31, 1995.................... $20,000 (437,382) (417,382)
Net loss--year ended January 31, 1996.......... -- (7,500) (7,500)
------- -------- --------
Balance at January 31, 1996.................... 20,000 (444,882) (424,882)
Net income--year ended January 31, 1997........ -- 514,715 514,715
------- -------- --------
Balance at January 31, 1997.................... 20,000 69,833 89,833
Net income--twelve-months ended December 31,
1997.......................................... -- 822,364 822,364
Net loss--month of January 1997 (note 1(b)).... -- (1,753) (1,753)
------- -------- --------
Balance at December 31, 1997................... $20,000 890,444 910,444
======= ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-39
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE YEARS ENDED JANUARY 31, 1996 AND 1997 AND THE
TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
TWELVE-MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 31, 1996 JANUARY 31, 1997 DECEMBER 31, 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)....... $ (7,500) 514,715 822,364
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Net loss for the month
of January 1997
(note 1(b)).......... -- -- (1,753)
Depreciation and
amortization......... 237,118 322,628 268,732
Deferred income taxes. 151,090 106,198 119,342
Decrease (increase) in
trade accounts
receivable........... (74,638) 63,597 (189,448)
Increase in due from
related parties...... (6,512) (10,285) (39,486)
Increase in due from
employees............ -- -- (2,929)
Decrease (increase) in
inventories.......... -- (20,661) 10,711
Decrease (increase) in
prepaid expenses..... (29,858) 7,609 10,368
Increase in
receivables from
related parties...... (34,549) (297,009) (674,439)
Increase (decrease) in
accounts payable..... 65,853 (49,744) 29,925
Increase (decrease) in
accrued payroll and
related costs........ 62,316 (58,732) 56,806
Increase (decrease) in
income taxes payable. (30,809) 75,650 284,476
(Decrease) increase in
other accrued
expenses............. 6,130 (1,785) (2,195)
--------- -------- --------
Net cash provided by
operating
activities......... 338,641 652,181 692,474
--------- -------- --------
Cash flows from investing
activities:
Purchases of property,
plant and equipment.... (700,708) (493,663) (472,715)
Purchase of Custom
Towing................. (200,000) -- --
--------- -------- --------
Net cash used in
investing
activities......... (900,708) (493,663) (472,715)
--------- -------- --------
Cash flows from financing
activities:
Proceeds from long-term
debt................... 424,979 -- --
Principal payments on
long-term debt......... -- (104,014) (133,341)
Proceeds from borrowings
under lines of credit.. 150,000 120,000 --
--------- -------- --------
Net cash (used in)
provided by
financing
activities......... 574,979 15,986 (133,341)
--------- -------- --------
Net increase in cash...... 12,912 174,504 86,418
Cash at beginning of year. (7,147) 5,765 180,269
--------- -------- --------
Cash at end of year....... $ 5,765 180,269 266,687
========= ======== ========
Supplemental disclosure of
cash flow information:
Cash paid during the
year for:
Interest.............. $ 258,554 325,370 253,242
========= ======== ========
Income taxes.......... $ 58,439 61,656 37,160
========= ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-40
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1996, JANUARY 31, 1997 AND DECEMBER 31, 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Smith-Christensen Enterprises, Inc. and its wholly-owned subsidiary City
Towing, Inc.(d/b/a Quality Towing), collectively referred to herein as
"Quality", was founded in 1978. Quality's primary business is towing,
impounding and storing vehicles for municipal, governmental and commercial
customers in Southern Nevada. Quality has two facilities in Las Vegas. It
operates approximately 40 vehicles.
(b) Periods Presented
Because Quality has a fiscal year end of January 31, the statements of
operations, stockholder's equity and cash flows for Quality's most recent
twelve-month period includes the results of operations for the month of
January 1997, which is also included in the prior fiscal year ended January
31, 1997. The following represents the condensed results of operations for the
month of January 1997 which is included in the twelve-month period ended
December 31, 1997 and in the fiscal year ended January 31, 1997:
<TABLE>
<S> <C>
Net revenue..................................................... $440,053
Cost of revenue................................................. 242,564
--------
Gross profit................................................ 197,489
Selling, general and administrative expenses.................... 174,187
--------
Income from operations...................................... 23,302
--------
Other expenses:
Interest expense.............................................. (24,193)
Other......................................................... (862)
--------
Loss before income taxes.................................... (1,753)
Income tax expense.......................................... --
--------
Net loss.................................................... $ (1,753)
========
</TABLE>
(c) Principles of Consolidation
The consolidated financial statements include the financial statements of
Smith-Christensen Enterprises, Inc. and its wholly-owned subsidiary City
Towing, Inc. All significant intercompany balances and transactions have been
eliminated in consolidation.
(d) Revenue Recognition
Quality operates as one segment related to the transportation of vehicles
and equipment for customers.
Quality's revenue is derived from customers who require a towing service,
fees related to the storage of vehicles that have been towed, transport of
vehicles and equipment, and auction sales of unclaimed vehicles. Towing
revenue is recognized at the completion of each towing engagement, storage
fees are accrued over the period the vehicles are held in the impound
facility, transport revenue is recognized upon the delivery of the
vehicles/equipment to their final destination, and revenue from auction sales
are recorded when title to the vehicles has been transferred. Expenses related
to the generation of revenue are recognized as incurred.
F-41
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(e) Inventories
Inventories consist of vehicles that will be offered for auction.
Inventories are stated at the lower of cost or market.
(f) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is determined
for financial statement purposes using the straight-line method over the
estimated useful lives of the individual assets or, for leasehold
improvements, over the terms of the related leases if shorter. Accelerated
methods of depreciation have been used for income tax purposes. For financial
statement purposes, Quality provides for depreciation of property and
equipment over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings...................................................... 28-30 years
Leasehold improvements......................................... 15-30 years
Transportation and towing equipment............................ 5-15 years
Office equipment............................................... 3-5 years
Machinery and other equipment.................................. 5 years
</TABLE>
(g) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to Quality on bank loans with
similar terms and maturities, the fair value of Quality's financial
instruments approximates their carrying values.
(h) Income Taxes
Income taxes are accounted for under the asset and liability method.
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, and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted 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 of a change in tax
rates is recognized in income in the period that includes the enactment date.
(i) Use of Estimates
Management of Quality has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) PREPAID EXPENSES
Prepaid expenses consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1997 1997
----------- ------------
<S> <C> <C>
Prepaid insurance................................. $28,010 $19,680
Prepaid interest.................................. 2,038 --
------- -------
$30,048 $19,680
======= =======
</TABLE>
F-42
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1997 1997
----------- ------------
<S> <C> <C>
Land.............................................. $ 600,000 $ 600,000
Buildings......................................... 156,225 156,225
Leasehold improvements............................ 278,925 278,925
Transportation and towing equipment............... 2,109,893 2,481,396
Office equipment.................................. 123,691 212,066
Machinery and other equipment..................... 112,889 125,726
---------- ----------
Total........................................... 3,381,623 3,854,338
Less accumulated depreciation and amortization.... (728,380) (977,109)
---------- ----------
$2,653,243 $2,877,229
========== ==========
</TABLE>
Depreciation and amortization of property, plant and equipment for the years
ended January 31, 1996 and 1997 and the twelve-month period ended December 31,
1997, totaled $140,910, $224,196, and $271,341, respectively.
(4) OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1997 1997
----------- ------------
<S> <C> <C>
Metro Contract.................................... $ 705,850 $ 705,850
Non-compete agreement............................. 25,000 25,000
Goodwill.......................................... 225,048 225,048
--------- ---------
Total........................................... 955,898 955,898
Less accumulated amortization..................... (836,990) (856,993)
--------- ---------
$ 118,908 $ 98,905
========= =========
</TABLE>
Metro contract costs, non-compete agreement and goodwill are amortized over
nine, five and fifteen years, respectively. Amortization expense totaled,
$96,208, $98,432 and $20,003 for the years ended January 31, 1996 and 1997 and
the twelve-month period ended December 31, 1997.
F-43
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) INDEBTEDNESS
Quality's long-term debt at January 31, 1997 and December 31, 1997 consisted
of the following:
<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1997 1997
----------- ------------
<S> <C> <C>
Notes payable to bank, payable in aggregate
monthly installments of $20,312, plus inter-
est ranging from 9% to 9.25% over periods
ranging from 36 to 48 months, maturing be-
tween September 5, 1998 and June, 2001. Se-
cured by vehicles and equipment. ............ $ 428,678 $ 596,105
Note payable to former owner, payable in var-
ied monthly installments, including interest
at 10%, with a final lump sum payment of
$1,396,556, maturing March 1, 1999. Secured
by land, building and the stock of City Tow-
ing, Inc. ................................... 1,682,529 1,562,530
Note payable to former owner, payable in
monthly installments of $3,800, including in-
terest at 9%, maturing July 1, 2003. Secured
by land and building. ....................... 226,489 202,485
Note payable to Navistar, payable in monthly
installments of $1,433, including interest at
10.5%, maturing May 4, 1999. Secured by
equipment. .................................. 35,444 22,540
Notes payable to Navistar, payable in monthly
installments of $6,110 and 2,900, respective-
ly, including interest at 9%, maturing May
12, 1999 and August 11, 1999, respectively.
Secured by equipment. ....................... 240,964 158,685
Note payable to Navistar, payable in monthly
installments of $563, including interest at
11.5%, maturing August 28, 1997. Secured by
equipment. .................................. 3,796 --
Note payable to bank, payable in monthly in-
stallments of $6,716, including interest at
8%, maturing July 1, 2000. Secured by equip-
ment. ....................................... 245,316 187,529
---------- ----------
Total long-term debt........................ 2,863,216 2,729,874
Less installments due within one year......... (447,875) (541,836)
---------- ----------
Long-term debt, excluding current install-
ments...................................... $2,415,341 $2,188,038
========== ==========
</TABLE>
Annual maturities of long-term debt for the next five years and thereafter
are as follows:
<TABLE>
<S> <C>
1998............................................................ $ 541,836
1999............................................................ 1,771,119
2000............................................................ 264,155
2001............................................................ 81,521
2002............................................................ 40,849
Thereafter...................................................... 30,394
----------
$2,729,874
==========
</TABLE>
F-44
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) LEASES
Quality leases land and building used as part of its operations under a
lease agreement with Nevada Recycling Corporation, an affiliated entity owned
by the owners of the stockholder of Quality. The lease is classified as an
operating lease. The agreement provides for monthly rental payments of $8,000
with an automatic renewal for additional consecutive periods of one year
beginning every October, unless either party gives no less than 30 days
written notice of the intent to terminate. Quality is responsible for all
operating costs related to the property.
Rent expense was $96,000 for the years ended January 31, 1996 and 1997 and
the twelve-month period ended December 31, 1997, respectively.
(7) INCOME TAXES
Income tax expense for the years ended January 31, 1997 and 1996 and the
twelve-month period ended December 31, 1997 consists of:
<TABLE>
<CAPTION>
TWELVE-MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 31, JANUARY 31, DECEMBER 31,
1996 1997 1997
----------- ----------- ------------
<S> <C> <C> <C>
Current:
Federal............................... $(47,338) 171,425 321,636
Deferred.............................. 151,090 106,198 119,342
-------- ------- -------
$103,752 277,623 440,978
======== ======= =======
</TABLE>
The following table reconciles the expected tax expense at the Federal
statutory tax rate to the effective tax rate:
<TABLE>
<CAPTION>
TWELVE-MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 31, JANUARY 31, DECEMBER 31,
1996 1997 1997
----------- ----------- ------------
<S> <C> <C> <C>
Computed expected tax expense......... $ 32,726 269,395 429,536
Meals and entertainment............... 1,114 6,345 6,341
Non-deductible goodwill............... 5,101 5,101 5,101
Adjustment to prior years' taxes...... 64,811 -- --
Other................................. -- (3,218) --
-------- ------- -------
$103,752 277,623 440,978
======== ======= =======
</TABLE>
F-45
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities as of January 31, 1997 and the twelve-
month period ended December 31, 1997 are presented below:
<TABLE>
<CAPTION>
TWELVE-MONTH
PERIOD ENDED
JANUARY 31, DECEMBER 31,
1997 1997
----------- ------------
<S> <C> <C>
Deferred tax assets:
Covenant-not-to-compete........................ $ 2,031 3,164
Contract/intangible............................ 13,733 --
-------- -------
Total gross deferred tax assets.............. 15,764 3,164
Less valuation allowance..................... -- --
-------- -------
15,764 3,164
Deferred tax liabilities:
Property and equipment, due to differences in
depreciation lives and methods................ 209,143 315,885
-------- -------
Net deferred tax liability..................... $193,379 312,721
======== =======
</TABLE>
At January 31, 1996, the net deferred tax liability was $299,577 and there
was no recorded valuation allowance.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning strategies, as
well as carryback opportunities, in making this assessment. Based upon the
level of historical taxable income, projections for future taxable income and
carryback opportunities over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not Quality will
realize the benefits of these deductible differences. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income are reduced.
(8) NON-CASH TRANSACTIONS
During 1995, Quality financed $331,223 of certain transportation and towing
equipment in connection with the purchase of Custom Towing through a lending
institution.
(9) RELATED PARTY TRANSACTIONS
Accounts receivable from related parties are amounts due from four companies
under the common control of Quality's stockholders. The amounts receivable
totaled $167,959 and $881,884 as of January 31, 1997 and December 31, 1997,
respectively.
Quality leases land and building from an affiliated entity owned by the
owners of the stockholder of Quality (see note 6).
(10) CONTINGENT LIABILITIES
Various legal claims arise against Quality during the normal course of
business. In the opinion of management, liabilities, if any, arising from
proceedings would not have a material effect on the financial statements.
F-46
<PAGE>
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) SUBSEQUENT EVENT
During February 1998, the stockholder entered into a definitive agreement to
sell Quality net of land, buildings and leasehold improvements and the note
payable to the former owner of City Towing, in the amount of $202,485 at
December 31, 1997, to United Road Services, Inc. The sales transaction,
affected through a combination of cash and common stock of United Road
Services, Inc., is contingent and effective upon the initial public offering
of the common stock of United Road Services, Inc. The anticipated selling
price of Quality exceeds its net assets as of December 31, 1997.
Concurrently with the acquisition, United Road Services, Inc. will enter
into agreements with the stockholder to lease land and buildings used in
Quality's operations for negotiated amounts and terms.
F-47
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders
Caron Auto Works, Inc. and
Caron Auto Brokers, Inc.:
We have audited the accompanying combined balance sheets of Caron Auto
Works, Inc. and Caron Auto Brokers, Inc. (collectively, "Caron") as of
September 30, 1996 and 1997, and the related combined statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended September 30, 1997. These combined financial
statements are the responsibility of Caron's management. Our responsibility is
to express an opinion on these combined financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Caron
Auto Works, Inc. and Caron Auto Brokers, Inc. as of September 30, 1996 and
1997 and the results of their combined operations and their combined cash
flows for each of the years in the three-year period ended September 30, 1997
in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
January 16, 1998
F-48
<PAGE>
CARON AUTO WORKS, INC. AND
CARON AUTO BROKERS, INC.
COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................. $ 29,370 $ 108,163
Trade accounts receivable, net of allowance for
doubtful accounts of $26,793 in 1996 and $45,079 in
1997................................................ 633,736 746,332
Accounts receivable from related parties (note 7).... 98,056 49,754
Accounts receivable from employees................... -- 6,500
Notes receivable..................................... -- 44,539
Inventories.......................................... 24,185 30,040
Prepaid and other current assets..................... 38,685 5,142
---------- ----------
Total current assets............................... 824,032 990,470
Property and equipment, net (notes 2, 3 and 4)......... 1,241,097 2,278,962
Other assets........................................... 2,500 22,736
---------- ----------
Total assets....................................... $2,067,629 $3,292,168
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 3)...... $ 83,297 $ 263,093
Current installments of obligations under capital
lease (note 4)...................................... 181,272 177,932
Borrowings under lines of credit (note 3)............ 18,839 225,000
Payable to related parties (note 7).................. 185,920 9,500
Accounts payable..................................... 130,282 332,544
Accrued payroll and related costs.................... 16,058 40,870
Income taxes payable (note 5)........................ 101,128 92,447
Other accrued liabilities............................ 24,021 48,277
---------- ----------
Total current liabilities.......................... 740,817 1,189,663
Long-term liabilities:
Long-term debt, excluding current installments (note
3).................................................. 56,982 1,010,856
Obligations under capital lease, excluding current
installments (note 4)............................... 428,862 437,789
Deferred income taxes (note 5)....................... 160,342 54,019
---------- ----------
Total liabilities.................................. 1,387,003 2,692,327
---------- ----------
Stockholders' equity:
Common stock, $10 par value.
Authorized 10,000 shares; issued and outstanding 200
shares in 1996 and 1997............................. 2,000 2,000
Additional paid-in capital........................... 10,225 10,225
Retained earnings.................................... 698,401 617,616
Less treasury stock, 3,000 common shares in 1996 and
1997, at cost....................................... (30,000) (30,000)
---------- ----------
Total stockholders' equity......................... 680,626 599,841
---------- ----------
Total liabilities and stockholders' equity......... $2,067,629 $3,292,168
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-49
<PAGE>
CARON AUTO WORKS, INC. AND
CARON AUTO BROKERS, INC.
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net revenue................................ $4,624,155 $5,575,257 $6,626,850
Cost of revenue............................ 4,044,834 5,083,883 6,303,546
---------- ---------- ----------
Gross profit........................... 579,321 491,374 323,304
Selling, general and administrative
expenses.................................. 238,006 237,943 511,510
---------- ---------- ----------
Income (loss) from operations.......... 341,315 253,431 (188,206)
---------- ---------- ----------
Other income (expense):
Interest expense......................... (77,693) (108,069) (141,000)
Interest income.......................... 810 5,706 8,360
Gain on sale of assets................... 7,457 16,985 114,966
Other.................................... 25,570 22,526 29,460
---------- ---------- ----------
Income (loss) before income taxes...... 297,459 190,579 (176,420)
Income tax expense (benefit) (note 5)...... 103,020 61,838 (95,635)
---------- ---------- ----------
Net income (loss)...................... $ 194,439 $ 128,741 $ (80,785)
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-50
<PAGE>
CARON AUTO WORKS, INC. AND
CARON AUTO BROKERS, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at September 30,
1994...................... $2,000 $10,225 $375,221 $(30,000) $357,446
Net income--1995........... -- -- 194,439 -- 194,439
------ ------- -------- -------- --------
Balance at September 30,
1995...................... 2,000 10,225 569,660 (30,000) 551,885
Net income--1996........... -- -- 128,741 -- 128,741
------ ------- -------- -------- --------
Balance at September 30,
1996...................... 2,000 10,225 698,401 (30,000) 680,626
Net loss--1997............. -- -- (80,785) -- (80,785)
------ ------- -------- -------- --------
Balance at September 30,
1997...................... $2,000 $10,225 $617,616 $(30,000) $599,841
====== ======= ======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-51
<PAGE>
CARON AUTO WORKS, INC. AND
CARON AUTO BROKERS, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $ 194,437 $ 128,741 $ (80,785)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization............. 158,790 196,937 213,290
Deferred income taxes..................... 41,924 18,467 (106,323)
Gain on sale of assets.................... (7,457) (16,985) (114,966)
Increase in trade accounts receivable..... (63,618) (119,278) (112,596)
Decrease (increase) in receivables from
related parties.......................... (12,056) (66,885) 48,302
Increase in accounts receivable from
employees................................ -- -- (6,500)
(Increase) decrease in inventories........ 4,705 (23,766) (5,855)
Decrease (increase) in prepaid expenses... 4,758 (19,644) 33,543
(Increase) decrease in other assets....... 191 -- (20,236)
Decrease in amounts payable to related
parties.................................. (10,702) (22,889) (176,420)
Increase (decrease) in accounts payable... (44,731) 16,036 202,262
Increase (decrease) in accrued payroll and
related costs............................ (119,686) (1,670) 24,812
Increase in other accrued liabilities..... 447 86,401 15,575
--------- --------- ---------
Net cash provided by (used in) operating
activities............................. 147,002 175,465 (85,897)
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment......... (142,383) (54,909) (333,277)
Proceeds from sale of assets................ 123,913 56,011 341,196
Increase in notes receivable................ -- -- (44,539)
--------- --------- ---------
Net cash provided by (used in) investing
activities............................. (18,470) 1,102 (36,620)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt................ 100,000 70,345 456,500
Principal payments on long-term debt and
capital leases............................. (174,880) (300,175) (461,351)
Borrowings under line of credit, net........ (35,000) 18,839 206,161
--------- --------- ---------
Net cash provided by (used in) financing
activities............................. (109,880) (210,991) 201,310
--------- --------- ---------
Net increase (decrease) in cash............... 18,652 (34,424) 78,793
Cash at beginning of year..................... 45,142 63,794 29,370
--------- --------- ---------
Cash at end of year........................... $ 63,794 $ 29,370 $ 108,163
========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest.................................. $ 124,505 $ 110,038 $ 143,639
========= ========= =========
Income taxes............................ $ -- $ 61,096 $ 43,371
========= ========= =========
</TABLE>
See accompanying notes to combined financial statements.
F-52
<PAGE>
CARON AUTO WORKS, INC. AND
CARON AUTO BROKERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, 1996 AND 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Caron Auto Works, Inc. and Caron Auto Brokers, Inc. (collectively, "Caron")
was founded in 1976. Caron's primary businesses are transporting vehicles for
leasing companies, long-haul transporters and individuals in the Northeastern
United States, and towing vehicles for commercial and private customers in the
Hartford, Connecticut region. Caron has two facilities in East Hartford and
facilities in New Jersey and Florida. It operates approximately 55 vehicles.
(b) Principles of Combination
The combined financial statements include the financial statements of Caron
Auto Works, Inc. and Caron Auto Brokers, Inc. All significant intercompany
balances and transactions have been eliminated in combination. Both entities
have the same management and principal stockholder ownership.
(c) Revenue Recognition
Caron operates as one segment related to the transportation of vehicles and
equipment for customers.
Caron's revenue is derived from customers who require a towing service,
transport of vehicles and equipment, fees related to repair of vehicles that
have been towed, and auction sales of unclaimed vehicles. Towing revenue is
recognized at the completion of each towing engagement, transport revenue is
recognized upon the delivery of the vehicles/equipment to their final
destination, repair fees are recorded when the service is performed, and
revenue from auction sales are recorded when title to the vehicles has been
transferred. Expenses related to the generation of revenue are recognized as
incurred.
(d) Inventories
Inventories include spare parts used in the repair of vehicles and are
stated at the lower of cost or market.
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation is determined for
financial statement purposes using the straight-line method over the estimated
useful lives of the individual assets or, for leasehold improvements, over the
terms of the related leases if shorter. Accelerated methods of depreciation
have been used for income tax purposes. For financial statement purposes,
Caron provides for depreciation of property and equipment over the following
estimated useful lives:
<TABLE>
<S> <C>
Automobiles and transportation equipment.......................... 5 years
Furniture and fixtures............................................ 5-7 years
Machinery and equipment........................................... 5-7 years
Leasehold improvements............................................ 7-39 years
</TABLE>
(f) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to Caron on bank loans with
similar terms and maturities, the fair value of Caron's financial instruments
approximates their carrying values.
F-53
<PAGE>
CARON AUTO WORKS, INC.
AND CARON AUTO BROKERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(g) Income Taxes
Income taxes are accounted for under the asset and liability method.
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, and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted 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 of a change in tax
rates is recognized in income in the period that includes the enactment date.
(h) Use of Estimates
Management of Caron has made a number of estimates and assumptions relating
to the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ
from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Vehicles................................................ $ 16,608 $ 42,258
Office equipment........................................ 75,590 112,455
Transportation and towing equipment..................... 1,663,407 2,604,541
Leasehold improvements.................................. 262,276 313,011
---------- ----------
Total................................................. 2,017,881 3,072,265
Less accumulated depreciation and amortization.......... (776,784) (793,303)
---------- ----------
$1,241,097 $2,278,962
========== ==========
</TABLE>
Depreciation and amortization of property and equipment in 1995, 1996 and
1997 totaled $158,790, $196,937 and $213,290, respectively.
(3) INDEBTEDNESS
Caron has available a $250,000 line of credit with Bank of South Windsor,
secured by all corporate assets and a personal guarantee by Caron's primary
stockholder. Interest is payable at the prime lending rate plus 1% (9.5% at
September 30, 1997). Total borrowings under this unsecured line of credit as
of September 30, 1996 and 1997 amounted to $18,839 and $225,000, respectively.
F-54
<PAGE>
CARON AUTO WORKS, INC.
AND CARON AUTO BROKERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Caron's long-term debt at September 30, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Note payable to Savings Bank of Manchester, payable in
monthly principal payments of $1,085, plus interest at
8.25%, maturing September 29, 2000. Secured by a car
and the personal guarantee of the primary stockholder.. $ -- $ 34,500
Note payable to Savings Bank of Manchester, payable in
monthly principal payments of $2,500, plus interest at
prime plus 1% (9.5% at September 30, 1997), maturing on
August 26, 2002. Secured by a car and the personal
guarantee of the primary stockholder................... -- 147,500
Note payable to Savings Bank of Manchester, payable in
monthly installments of $692, including interest at
8.25%, maturing on August 29, 2000. Secured by a car... -- 21,459
Note payable to unrelated individual, payable in monthly
installments of $580, including interest at 12.5%,
maturing on October 31, 2000........................... 22,364 17,947
Note payable to Bank of South Windsor, payable in
monthly installments of $1,633, including interest at
9.5%. Matured in October, 1996. Secured by one tractor
and three trailers..................................... 1,844 --
Note payable to Bank of South Windsor, payable in
monthly principal payments of $1,111, plus interest at
prime plus 1% (9.5% at September 30, 1997), maturing on
April 18, 1999. Secured by assets of Caron and the
personal guarantee of the primary stockholder.......... 34,444 21,111
Note payable to Bank of South Windsor, payable in
monthly installments of $8,904, including interest at
9.25%, maturing on March 27, 2002. Secured by twelve
tractors and twelve trailers and the personal guarantee
of the primary stockholder............................. -- 390,878
Note payable to Peoples Bank, payable in monthly
principal payments of $1,786, plus interest at prime
plus 1.5% (10% at September 30, 1997), maturing August
15, 2004. Secured by the assets of Caron and the
personal guarantee of the primary stockholder and
affiliated companies................................... -- 148,214
Note payable to Bank of South Windsor, payable in
monthly installments of $3,203, including interest at
9.5%. Secured by assets of Caron and the personal
guarantee by the primary stockholder................... 40,498 --
Note payable to Ford Motor Credit Company, payable in
monthly installments of $770, including interest at
10%, maturing November 27, 1998. Secured by a truck.... 24,979 17,924
Note payable to Ford Motor Credit Company, payable in
monthly installments of $959, including interest at
8.5%. Secured by equipment............................. 16,150 --
Note payable to Navistar Financial Corp., payable in
monthly installments ranging from $1,632 to $6,788,
including interest at rates of 9.9% and 10.3%, maturing
between 2001 and 2002. Secured by tractors and
trailers............................................... -- 474,416
-------- ----------
Total long-term debt.................................. 140,279 1,273,949
Less installments due within one year................... (83,297) (263,093)
-------- ----------
Long-term debt, excluding current installments........ $ 56,982 $1,010,856
======== ==========
</TABLE>
F-55
<PAGE>
CARON AUTO WORKS, INC.
AND CARON AUTO BROKERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of long-term debt for each of the five years
subsequent to September 30, 1997 are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 263,093
1999.............................................................. 279,925
2000.............................................................. 285,877
2001.............................................................. 259,616
2002.............................................................. 144,384
Thereafter........................................................ 41,054
----------
$1,273,949
==========
</TABLE>
(4) LEASES
Caron is the lessee for various transportation and towing equipment under
capital leases expiring in 2002.
Following is a summary of equipment held under the capital leases at
September 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Transportation and towing equipment.................... $ 885,356 $ 741,628
Less accumulated amortization.......................... (186,143) (198,826)
--------- ---------
$ 699,213 $ 542,802
========= =========
</TABLE>
Caron leases the building used for its operations on a month-to-month basis
from its primary stockholder. The lease is classified as an operating lease.
Caron is responsible for all operating costs related to the property. Rent
paid to the stockholder in 1995, 1996 and 1997 was $75,382, $77,181 and
$117,096, respectively.
Total rent expense for 1995, 1996 and 1997 was $84,382, $86,181 and
$126,096, respectively.
Future minimum capital lease payments as of September 30, 1997 are:
<TABLE>
<S> <C>
Year Ending September 30,
1998............................................................ $ 236,171
1999............................................................ 208,828
2000............................................................ 178,665
2001............................................................ 93,094
2002............................................................ 5,644
---------
Total......................................................... 722,402
Less amount representing interest............................... (106,681)
---------
Present value of net minimum capital lease payments........... $ 615,721
=========
</TABLE>
F-56
<PAGE>
CARON AUTO WORKS, INC.
AND CARON AUTO BROKERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(5) INCOME TAXES
Income tax expense (benefit) for the years ended September 30, 1995, 1996
and 1997 consists of:
<TABLE>
<CAPTION>
1995 1996 1997
-------- ------- ---------
<S> <C> <C> <C>
Current:
Federal........................................ $ 38,174 $26,900 $ 5,789
State.......................................... 22,922 16,471 4,899
-------- ------- ---------
61,096 43,371 10,688
Deferred......................................... 41,924 18,467 (106,323)
-------- ------- ---------
$103,020 $61,838 $ (95,635)
======== ======= =========
</TABLE>
The following table reconciles the expected tax expense at the Federal
statutory tax rate to the effective tax rate.
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Computed expected tax expense (benefit)....... $101,136 $ 64,797 $(59,983)
State income taxes, net of Federal benefit.... 15,129 10,871 3,233
Officer's life insurance...................... 427 -- --
Non-deductible meals and entertainment
expenses..................................... 512 998 1,647
Effect of graduated tax rates................. (16,262) (14,980) (34,847)
Other......................................... 2,078 152 (5,685)
-------- -------- --------
$103,020 $ 61,838 $(95,635)
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities as of September 30, 1996 and 1997 are
presented below:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Allowance for bad debts............................. $ 10,091 $ 19,830
Net operating loss carryforwards.................... -- 186,261
--------- ---------
Total gross deferred tax asset.................... 10,091 206,091
Less valuation allowance.......................... -- --
--------- ---------
Net deferred tax asset............................ 10,091 206,091
Deferred tax liabilities:
Property and equipment, due to differences in
depreciation lives and methods..................... (170,133) (260,110)
--------- ---------
Net deferred tax liability........................ $(160,342) $ (54,019)
========= =========
</TABLE>
Caron had a net deferred tax liability of $141,875 at September 30, 1995.
The net operating loss carryforward of approximately $465,000 expires in 2017.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning
F-57
<PAGE>
CARON AUTO WORKS, INC.
AND CARON AUTO BROKERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
strategies, as well as carryback opportunities, in making this assessment.
Based upon the level of historical taxable income, projections for future
taxable income and carryback opportunities over the periods in which the
deferred tax assets are deductible, management believes it is more likely than
not Caron will realize the benefits of these deductible differences. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income are reduced.
(6) NON-CASH TRANSACTIONS
During 1997, Caron leased $1,144,108 of various transportation and towing
equipment through several lending institutions (see note 3).
(7) RELATED PARTY TRANSACTIONS
Caron is indebted to the primary stockholder under an unsecured note,
bearing interest at 7% per annum. The note, unpaid interest on the note, and
accrued bonus to the sole stockholder are included in payable to related
parties in the accompanying combined balance sheets.
Included in accounts receivable from related parties are amounts due from
two companies under the common control of Caron's primary stockholder. The
amounts receivable totaled $98,056 and $49,757 as of September 30, 1996 and
1997, respectively.
Caron leases two buildings located in East Hartford, Connecticut, from the
primary stockholder (see note 4).
(8) SUBSEQUENT EVENT
During February 1998, the stockholders entered into a definitive agreement
to sell Caron to United Road Services, Inc. The sales transaction, affected
through a combination of cash and common stock of United Road Services, Inc.,
is contingent and effective upon the initial public offering of the common
stock of United Road Services, Inc. The anticipated selling price of Caron
exceeds its net assets as of September 30 1997.
Concurrently with the acquisition, United Road Services, Inc. will enter
into agreements with the stockholders to lease land and buildings used in
Caron's operations for negotiated amounts and terms.
F-58
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholder
Absolute Towing and Transporting, Inc.:
We have audited the accompanying balance sheets of Absolute Towing and
Transporting, Inc. ("Absolute") as of December 31, 1996 and 1997, and the
related statements of operations, stockholder's equity, and cash flows for the
years then ended. These financial statements are the responsibility of
Absolute's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 6, 99% of Absolute's revenue is derived from one
customer, and all of Absolute's trade accounts receivable at December 31, 1997
are due from this single customer.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Absolute Towing and
Transporting, Inc. as of December 31, 1996 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
January 28, 1998
F-59
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ -- $ 10,935
Trade accounts receivable (note 3)....................... 268,818 593,679
Income taxes receivable (note 5)......................... 9,731 55,324
Prepaid expenses......................................... 23,613 30,587
-------- ----------
Total current assets................................... 302,162 690,525
Property and equipment, net (notes 2 and 3)................ 265,934 306,153
Deferred income taxes (note 5)............................. 6,436 31,331
-------- ----------
Total assets........................................... $574,532 $1,028,009
======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current installments of long-term debt (note 3).......... 15,737 16,218
Borrowings under lines of credit (note 3)................ -- 212,403
Book overdraft........................................... 98,012 312,217
Accounts payable......................................... 79,468 124,573
-------- ----------
Total current liabilities.............................. 193,217 665,411
Long-term liabilities:
Long-term debt, excluding current installments (note 3).. -- 83,782
-------- ----------
Total liabilities...................................... 193,217 749,193
-------- ----------
Stockholder's equity:
Common stock, $42.86 par value. Authorized, issued and
outstanding 1,000 shares in 1996 and 1997............... 42,860 42,860
Retained earnings........................................ 338,455 235,956
-------- ----------
Total stockholder's equity............................. 381,315 278,816
-------- ----------
Total liabilities and stockholder's equity............. $574,532 $1,028,009
======== ==========
</TABLE>
See accompanying notes to financial statements.
F-60
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Net revenue............................................ $3,464,623 $4,779,901
Cost of revenue........................................ 2,756,327 3,766,564
---------- ----------
Gross profit....................................... 708,296 1,013,337
Selling, general and administrative expenses........... 635,595 1,095,416
---------- ----------
Income (loss) from operations...................... 72,701 (82,079)
---------- ----------
Other income (expense):
Interest expense..................................... (1,440) (15,018)
Gain (loss) on sale of assets........................ (2,842) 9,254
---------- ----------
Income (loss) before income taxes.................. 68,419 (87,843)
Income tax benefit (note 5)............................ (12,667) (24,095)
---------- ----------
Net income (loss).................................. $ 81,086 $ (63,748)
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-61
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDER'S
STOCK EARNINGS EQUITY
------- -------- -------------
<S> <C> <C> <C>
Balance at December 31, 1995.................... $42,860 $262,370 $305,230
Distributions to stockholder.................... -- (5,001) (5,001)
Net income--1996................................ -- 81,086 81,086
------- -------- --------
Balance at December 31, 1996.................... 42,860 338,455 381,315
Distributions to stockholder.................... -- (38,751) (38,751)
Net loss--1997.................................. -- (63,748) (63,748)
------- -------- --------
Balance at December 31, 1997.................... $42,860 $235,956 $278,816
======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-62
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ 81,086 $ (63,748)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................ 110,327 127,960
Deferred income taxes................................ (24,253) (24,895)
Loss (gain) from sale of property and equipment...... 2,842 (9,254)
Increase in trade accounts receivable................ (75,514) (324,861)
Decrease (increase) in income taxes receivable....... 8,086 (45,593)
Decrease (increase) in prepaid expenses.............. 2,718 (6,974)
Increase in accounts payable......................... 29,252 45,105
--------- ---------
Net cash provided by (used in) operating
activities........................................ 134,544 (302,260)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment.................... (143,215) (192,675)
Proceeds from sale of property and equipment........... 11,749 33,750
--------- ---------
Net cash used in investing activities.............. (131,466) (158,925)
--------- ---------
Cash flows from financing activities:
Net increase in borrowings under line of credit........ -- 212,403
Increase (decrease) in book overdraft.................. (20,890) 214,205
Proceeds from long-term debt........................... 15,737 100,000
Principal payments on long term debt................... -- (15,737)
Stockholder distributions.............................. (5,001) (38,751)
--------- ---------
Net cash provided by (used in) financing
activities........................................ (10,154) 472,120
--------- ---------
Net (decrease) increase in cash.......................... (7,076) 10,935
Cash at beginning of year................................ 7,076 --
--------- ---------
Cash at end of year...................................... $ -- $ 10,935
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest............................................. $ 1,439 $ 15,018
========= =========
Income taxes....................................... $ 3,500 $ 46,393
========= =========
</TABLE>
See accompanying notes to financial statements.
F-63
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Absolute Towing and transporting, Inc. ("Absolute") was founded in 1987.
Absolute's primary business is towing and transporting salvage vehicles for
auction companies in Southern California. Absolute has one facility in Los
Angeles. It operates approximately 25 vehicles.
(b) Revenue Recognition
Absolute operates as one segment related to the transportation of vehicles
and equipment for customers.
Absolute's revenue is derived from customers who require a towing service.
Revenue is recognized at the completion of each towing engagement. Expenses
related to the generation of revenue are recognized as incurred.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation is determined for
financial statement purposes using the straight line method over the estimated
useful lives of the individual assets or, for leasehold improvements, over the
terms of the related leases, if shorter. Accelerated methods of depreciation
have been used for income tax purposes. For financial statement purposes,
Absolute provides for depreciation of property and equipment over the
following estimated useful lives:
<TABLE>
<S> <C>
Transportation and towing equipment................................ 3-5 years
Leasehold improvements............................................. 5 years
Furniture and fixtures............................................. 5 years
</TABLE>
(d) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to Absolute on bank loans with
similar terms and maturities, the fair value of Absolute's financial
instruments approximates their carrying values.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
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, and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted 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 of a change in tax
rates is recognized in income in the period that includes the enactment date.
(f) Use of Estimates
Management of Absolute has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
F-64
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Transportation and towing equipment................... $ 920,210 $ 974,036
Leasehold improvements................................ 3,740 27,110
Furniture and fixtures................................ 1,060 1,060
--------- ----------
Total............................................... 925,010 1,002,206
Less accumulated depreciation and amortization........ (659,076) (696,053)
--------- ----------
$ 265,934 $ 306,153
========= ==========
</TABLE>
Depreciation and amortization of property and equipment in 1996 and 1997
totaled $110,327 and $127,960, respectively.
(3) INDEBTEDNESS
Absolute has a line of credit with a bank in the amount of $300,000, which
bears interest at the bank's prime rate plus 1% (9.5% at December 31, 1997).
This line of credit expires on May 1, 1998. Borrowings under this line of
credit are $212,403 at December 31, 1997 and are secured by accounts
receivable, inventory, and equipment. Additionally, in 1997, Absolute entered
into a revolving credit agreement with a bank that provides for maximum
borrowings of $600,000. Outstanding borrowings bear interest at the bank's
prime rate plus 1% and are payable in 60 monthly installments beginning
December 10, 1998. The credit facility matures November, 1998. There were no
borrowings outstanding at December 31, 1997.
Absolute's long-term debt consisted of the following at December 31, 1996
and 1997:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Note payable to bank, payable in monthly installments of
$2,125, including interest at 10%, maturing December 1,
2002. Secured by personal property...................... $ 15,737 $100,000
Less installments due within one year.................. (15,737) (16,218)
-------- --------
Long-term debt, excluding current installments....... $ -- $ 83,782
======== ========
</TABLE>
Annual maturities of long-term debt for the next five years are as follows:
<TABLE>
<S> <C>
1998................................................................ $ 16,218
1999................................................................ 17,917
2000................................................................ 19,791
2001................................................................ 21,865
2002................................................................ 24,209
--------
$100,000
========
</TABLE>
(4) LEASES
Absolute leases the building used for its operations under a month-to-month
lease agreement. The lease is classified as an operating lease. The agreement
provides for monthly rental payments of $1,446. Absolute is responsible for
all operating costs related to the property.
Total rent expense for 1996 and 1997 was $24,442 and $18,800, respectively.
F-65
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1996 and 1997
consists of:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Current:
Federal................................................ $ 10,786 $ --
State.................................................. 800 800
-------- --------
11,586 800
Deferred................................................. (24,253) (24,895)
-------- --------
$(12,667) $(24,095)
======== ========
</TABLE>
The following table reconciles the expected tax expense at the Federal
statutory tax rate to the effective tax rate:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Computed expected tax expense........................... $ 23,262 $(29,867)
Effect of graduated tax rates........................... (10,018) 6,656
State income taxes, net of Federal benefit.............. 3,695 (1,626)
Los Angeles Revitalization Zone ("LARZ") credit......... (33,371) --
Non-deductible meals and entertainment expenses......... 3,765 742
-------- --------
$(12,667) $(24,095)
======== ========
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities as of December 31, 1996 and 1997 are
presented below:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Los Angeles Revitalization Zone credit.................. $12,927 $12,927
Net operating loss carryforward......................... -- 20,524
------- -------
Total gross deferred tax assets....................... 12,927 33,451
Less valuation allowance.............................. -- --
------- -------
12,927 33,451
Deferred tax liabilities:
Property and equipment, due to differences in
depreciation lives and methods......................... (6,491) (2,120)
------- -------
Net deferred tax asset................................ $ 6,436 $31,331
======= =======
</TABLE>
At December 31, 1995, the net deferred tax liability was $17,817. The net
operating loss carryforward of approximately $60,400 expires in 2017 and LARZ
credit of approximately $12,900 expires in 2011.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning strategies, as
well as carryback opportunities, in making this assessment. Based upon the
level of historical taxable income, projections for future taxable income and
carryback opportunities over the periods in which the
F-66
<PAGE>
ABSOLUTE TOWING AND TRANSPORTING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
deferred tax assets are deductible, management believes it is more likely than
not Absolute will realize the benefits of these deductible differences. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future income are reduced.
(6) CONCENTRATION OF BUSINESS RISKS
For both 1996 and 1997, 99% of Absolute's revenues were derived from one
customer. The loss of this customer could significantly effect Absolute's
performance.
(7) SUBSEQUENT EVENT
During February 1998, the stockholder entered into a definitive agreement to
sell Absolute to United Road Services, Inc. The sales transaction, affected
through a combination of cash and common stock of United Road Service, Inc., is
contingent and effective upon the initial public offering of the common stock
of United Road Service, Inc. The anticipated selling price of Absolute exceeds
its net assets as of December 31, 1997. Certain of the assets of Absolute, in
the amount of $65,000, will be retained by the stockholder.
F-67
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholder
Keystone Towing, Inc.:
We have audited the accompanying balance sheets of Keystone Towing, Inc.
("Keystone") as of December 31, 1996 and 1997, and the related statements of
operations, stockholder's equity, and cash flows for the years then ended.
These financial statements are the responsibility of Keystone's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Keystone Towing, Inc. as
of December 31, 1996 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
January 16, 1998
F-68
<PAGE>
KEYSTONE TOWING, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $193,165 $ 71,634
Trade accounts receivable................................ 97,368 167,192
Accounts receivable from employees....................... 3,443 2,989
Inventory................................................ 15,000 60,990
Note receivable--other................................... -- 5,000
Prepaid and other current assets (note 2)................ 47,684 98,111
-------- ----------
Total current assets................................... 356,660 405,916
Property and equipment, net (notes 3, 6 and 7)............. 598,850 1,038,776
Other non-current assets (note 4).......................... -- 82,256
-------- ----------
Total assets........................................... $955,510 $1,526,948
======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current installments of notes payable (note 6)........... 94,782 278,765
Borrowings under lines of credit (note 6)................ 7,558 73,297
Current installment of note payable to stockholder (notes
6 and 10)............................................... 31,724 35,046
Accounts payable......................................... 88,176 200,779
Accrued payroll and related costs........................ 53,309 52,157
Payable to affiliate (note 10)........................... -- 40,909
Other liabilities (note 5)............................... 301,965 326,778
-------- ----------
Total current liabilities.............................. 577,514 1,007,731
Long-term liabilities:
Notes payable, excluding current installments (note 6)... 156,940 349,982
Note payable to stockholder, excluding current
installments (notes 6 and 10)........................... 50,314 15,268
-------- ----------
Total liabilities...................................... 784,768 1,372,981
-------- ----------
Stockholder's equity:
Common stock, $2.00 par value. Authorized 100,000 shares;
issued and outstanding 10,000 shares in 1996 and 1997... 20,000 20,000
Retained earnings........................................ 150,742 133,967
-------- ----------
Total stockholder's equity............................. 170,742 153,967
-------- ----------
Total liabilities and stockholder's equity............. $955,510 $1,526,948
======== ==========
</TABLE>
See accompanying notes to financial statements.
F-69
<PAGE>
KEYSTONE TOWING, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Net revenue............................................. $3,369,354 $3,943,073
Cost of revenue......................................... 2,132,646 2,606,452
---------- ----------
Gross profit........................................ 1,236,708 1,336,621
Selling, general and administrative expenses............ 934,105 1,140,252
---------- ----------
Income from operations.............................. 302,603 196,369
---------- ----------
Other income (expense):
Interest expense...................................... (28,067) (71,451)
Interest income....................................... 2,534 1,556
Gain on sale of assets................................ -- 36,275
Other (note 10)....................................... -- 76,312
---------- ----------
Net income.......................................... $ 277,070 $ 239,061
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-70
<PAGE>
KEYSTONE TOWING, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDER'S
STOCK EARNINGS EQUITY
------ --------- -------------
<S> <C> <C> <C>
Balance at December 31, 1995.................... 20,000 $ 88,465 $ 108,465
Net income--1996................................ -- 277,070 277,070
Owner Distribution.............................. -- (214,793) (214,793)
------ --------- ---------
Balance at December 31, 1996.................... 20,000 150,742 170,742
Net income--1997................................ -- 239,061 239,061
Owner distribution.............................. -- (255,836) (255,836)
------ --------- ---------
Balance at December 31, 1997.................... 20,000 $ 133,967 $ 153,967
====== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-71
<PAGE>
KEYSTONE TOWING, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 277,070 $ 239,061
Adjustments to reconcile net income to net cash
provided by operating activities, net of effects of
acquisitions:
Depreciation and amortization........................ 155,367 280,075
Gain on sale of assets............................... -- (36,275)
Increase in trade accounts receivable................ (11,892) (69,824)
Decrease (increase) in accounts receivable from
employees........................................... (2,015) 454
Increase in inventory................................ (5,000) (45,990)
(Increase) decrease in prepaid and other current
assets.............................................. 10,619 (50,427)
Increase in accounts payable......................... 48,580 112,603
(Decrease) increase in accrued payroll and related
costs............................................... 16,970 (1,152)
Increase in payable to affiliate..................... -- 40,909
Increase in other liabilities........................ 44,984 24,813
--------- ---------
Net cash provided by operating activities.......... 534,683 494,247
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment.................... (97,818) (396,324)
Proceeds from sale of assets........................... -- 40,000
(Increase) decrease in note receivable--other.......... 24,351 (5,000)
--------- ---------
Net cash used in investing activities.............. (73,467) (361,324)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt........................... -- 13,289
Principal payments on long-term debt................... (146,768) (77,646)
Borrowings on line of credit, net...................... 7,557 65,739
Owner distributions.................................... (214,793) (255,836)
--------- ---------
Net cash used in financing activities.............. (354,004) (254,454)
--------- ---------
Net (decrease) increase in cash.......................... 107,212 (121,531)
Cash at beginning of year................................ 85,953 193,165
--------- ---------
Cash at end of year...................................... $ 193,165 $ 71,634
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest............................................. $ 28,067 $ 71,451
========= =========
</TABLE>
See accompanying notes to financial statements.
F-72
<PAGE>
KEYSTONE TOWING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Keystone Towing, Inc. ("Keystone") was founded in 1988. Keystone's primary
business is towing, impounding and storing vehicles for municipal,
governmental and commercial customers in Southern California. Keystone has one
facility in Los Angeles. It operates approximately 20 vehicles. Keystone
became an S-corporation under California law on June 3, 1993.
(b) Revenue Recognition
Keystone operates as one segment related to transportation of vehicles and
equipment for customers.
Keystone's revenue is derived from customers who require a towing service,
fees related to the storage of vehicles that have been towed, and auction
sales of unclaimed vehicles. Towing revenue is recognized at the completion of
each towing engagement, storage fees are accrued over the period the vehicles
are held in the impound facility, and revenue from auction sales are recorded
when title to the vehicles has been transferred. Expenses related to the
generation of revenue are recognized as incurred.
(c) Inventories
Inventories consist primarily of spare parts used for repair and maintenance
of transportation equipment. Inventories are stated at the lower of cost or
market.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is determined for
financial statement and tax purposes using the double-declining balance method
over the estimated useful lives of the individual assets or, for leasehold
improvements, over the terms of the related leases if shorter. For financial
statement purposes, Keystone provides for depreciation of property and
equipment over the following estimated useful lives:
<TABLE>
<S> <C>
Automobiles and transportation equipment.......................... 5 years
Furniture and fixtures............................................ 5-7 years
Machinery and equipment........................................... 5-7 years
Leasehold improvements............................................ 7-39 years
</TABLE>
(e) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to Keystone on bank loans with
similar terms and maturities, the fair value of Keystone's financial
instruments approximates their carrying values.
(f) Income Taxes
Effective June 3, 1993, Keystone elected to file its Federal income tax
returns under the S-corporation provisions of the Internal Revenue Code and
was granted S-corporation status for California state tax purposes. In
accordance with the Federal provisions, corporate earnings flow through and
are taxed solely at the stockholder level.
F-73
<PAGE>
KEYSTONE TOWING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Under the provisions of the California franchise tax law, S-corporation
earnings are assessed a 1.5% surtax at the corporate level and flow through to
the stockholder to be taxed at the individual level. Accordingly, no income
tax expense has been recorded for the years ended December 31, 1996 and 1997.
(g) Use of Estimates
Management of Keystone has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets as of December 31, 1996 and 1997 consist
of:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Prepaid insurance........................................... $ 6,750 $13,549
Prepaid vehicle registration................................ -- 22,010
Miscellaneous deposits...................................... 32,304 39,657
Prepaid property taxes...................................... 3,432 2,631
Other....................................................... 5,198 20,264
------- -------
$47,684 $98,111
======= =======
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Automobiles and transportation equipment............. $ 578,891 $1,025,234
Furniture and fixtures............................... 129,592 144,361
Machinery and equipment.............................. 240,653 270,163
Leasehold improvements............................... 273,137 460,641
---------- ----------
Total.............................................. 1,222,273 1,900,399
Less accumulated depreciation and amortization....... (623,423) (861,623)
---------- ----------
$ 598,850 $1,038,776
========== ==========
</TABLE>
Depreciation and amortization of property and equipment in 1996 and 1997
totaled $155,367 and $274,259, respectively.
(4) OTHER NON-CURRENT ASSETS
Other non-current assets at December 31, 1997 consist of the following (see
note 8):
<TABLE>
<S> <C>
Goodwill............................................................ $85,572
Covenant-not-to-compete............................................. 2,500
-------
Total............................................................. 88,072
Less accumulated amortization....................................... (5,816)
-------
$82,256
=======
</TABLE>
F-74
<PAGE>
KEYSTONE TOWING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, and covenant-not-to-compete are amortized on a
straight-line basis over fifteen and five years, respectively. Amortization
expense for other non-current assets totaled $5,816 in 1997.
(5) OTHER LIABILITIES
Other liabilities at December 31, 1996 and 1997 consist of:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Retirement savings plan payable........................... $ 70,964 $125,261
Parking and other taxes payable(a)........................ 123,647 107,734
Lien sale payable(b)...................................... 75,299 87,938
Insurance premiums payable................................ 3,745 4,220
Other..................................................... 28,310 1,625
-------- --------
$301,965 $326,778
======== ========
</TABLE>
- --------
(a) Parking and other taxes payable consist primarily of obligations to remit
standard parking fees to the City of Los Angeles.
(b) Lien sale payables arise from Keystone's obligation to remit to the state
a portion of proceeds generated by the sale of cars impounded by Keystone
but left unclaimed.
(6) INDEBTEDNESS
Keystone has available a $75,000 line of credit with a bank, expiring
January 16, 1998. Interest is payable at 10.5%. Total borrowings under this
unsecured line of credit as of December 31, 1996 and 1997 amounted to $7,558
and $73,297, respectively.
Keystone's long-term debt at December 31, 1996 and 1997 consists of:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Note payable to stockholder, payable in monthly
installments of $3,208, including interest at 10.06%,
maturing May 1999.................................... $ 82,038 $ 50,314
Notes payable to banks for various property and
equipment, payable in monthly installments ranging
from $427 to $5,527, including interest ranging from
8 1/2% to 11%, and maturing at dates ranging from
January, 1998 to April, 2002. Secured by the related
assets............................................... 209,136 599,407
Borrowings under a capital lease agreement, payable in
monthly installments of $1,492, including interest at
11%, maturing October 1999. Secured by the related
asset ............................................... 42,586 29,340
--------- ---------
Total long-term debt.............................. 333,760 679,061
Less installments due within one year............... (126,506) (313,811)
--------- ---------
Long-term debt, excluding current installments.... $ 207,254 $ 365,250
========= =========
</TABLE>
F-75
<PAGE>
KEYSTONE TOWING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Annual maturities for the next five years are as follows:
<TABLE>
<S> <C>
1998................................................................ $313,811
1999................................................................ 176,125
2000................................................................ 109,042
2001................................................................ 72,782
2002................................................................ 7,301
--------
$679,061
========
</TABLE>
(7) LEASES
Keystone leases the building used for its operations under a non-cancelable
lease agreement. The lease is classified as an operating lease. The agreement
provides for monthly rental payment of $39,630 through January 2002. Keystone
is responsible for all operating costs related to the property. Total rent
expense, including common area maintenance charges, for 1996 and 1997 was
$488,000 and $504,000, respectively.
Keystone is obligated under a capital lease for transportation equipment
that expires in October 1999. The capital lease obligation is included in the
long-term debt table and schedule of maturities in note 6.
Future minimum lease payments under noncancellable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31,
1997 are:
<TABLE>
<S> <C>
1998.............................................................. $ 475,560
1999.............................................................. 475,560
2000.............................................................. 475,560
2001.............................................................. 475,560
2002.............................................................. 475,560
----------
$2,377,800
==========
</TABLE>
(8) NON-CASH TRANSACTIONS
During March 1997, Keystone acquired, under the purchase method of
accounting, certain assets of a competitor for consideration of $203,702 in
the form of assumed liabilities of the selling party. The assets acquired were
recorded at their estimated fair value of $115,000. In addition, Keystone
secured a five year non-competition agreement from the selling party valued at
$2,500. The difference between the consideration given and the fair value of
assets acquired was recorded as goodwill in the amount of $85,572 (see note
4).
During 1997, Keystone leased $205,956 of various automobile and
transportation equipment through several lending institutions (see note 6).
(9) EMPLOYEE BENEFITS
Keystone has a retirement savings and disability plan pursuant to section
414(i) of the Internal Revenue Code that is available to all employees who
have at least 1,000 hours of service to Keystone during the plan year and are
employed on the last day of the year. This discretionary contribution plan
allows the employer discretion as to the amount to be contributed each year.
Keystone's contribution payable, included in other accrued liabilities on the
accompanying balance sheet, amounted to $70,964 and $125,261 as of December
31, 1996 and 1997, respectively (see note 5).
F-76
<PAGE>
KEYSTONE TOWING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(10) RELATED PARTY TRANSACTIONS
Keystone is indebted to the sole stockholder under an unsecured note,
bearing interest at 10.06% per annum (see note 6).
In the normal course of business Keystone performs subcontract towing
services for a related party company owned by another related party. Keystone
recognizes revenue on the towing services performed on behalf of the related
party net of subcontract expenses. The net revenue, recognized on subcontract
towing services performed amounted to approximately $17,000 and $19,000 for
1996 and 1997, respectively, and is included in net revenue on the statements
of operations. Additionally, Keystone recognized management fee income for
services performed on behalf of the related party company. Management fee
income amounted to approximately $0 and $16,000 for 1996 and 1997,
respectively.
The owner of Keystone is also a 10% owner of an Official Police Garage
("OPG"). Keystone recognizes management fee income for services performed on
behalf of the related party company. Management fee income amounted to
approximately $0 and $60,000 for 1996 and 1997, respectively.
The payable to related party of $40,909 on the accompanying balance sheet as
of December 31, 1997 represents miscellaneous obligations to the OPG discussed
above.
(11) CONTINGENT LIABILITIES
Various legal claims arise against Keystone during the normal course of
business. In the opinion of management, liabilities, if any, arising from
proceedings would not have a material effect on the financial statements.
(12) CONCENTRATION OF BUSINESS RISKS
Revenue generated from Keystone's exclusive agreement with the LAPD
discussed in note 1 represented approximately 30% of total revenues in 1996
and 27% in 1997. The loss of such business could significantly effect
Keystone's performance.
(13) SUBSEQUENT EVENT
During February 1998, the stockholder entered into a definitive agreement to
sell Keystone to United Road Services, Inc. The sales transaction, affected
through a combination of cash and common stock of United Road Services, Inc.,
is contingent and effective upon the initial public offering of the common
stock of United Road Services, Inc. The anticipated selling price of Keystone
exceeds its net assets as of December 31, 1997. Prior to the sale of Keystone,
the stockholder intends to take a distribution of not more than $150,000.
F-77
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholder
ASC Transportation Services:
We have audited the accompanying consolidated balance sheet of ASC
Transportation Services and subsidiary (Auto Service Center d/b/a ASC Truck
Service) ("Auto Service") as of December 31, 1997, and the related
consolidated statements of operations, stockholder's deficit, and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of Auto Service's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ASC
Transportation Services and subsidiary (Auto Service Center d/b/a ASC Truck
Service) as of December 31, 1997, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
February 10, 1998
F-78
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................. $ 138,213
Trade accounts receivable........................................ 225,364
Due from employees............................................... 715
Accounts receivable--other....................................... 4,977
Inventories...................................................... 18,167
Prepaid expenses................................................. 69,535
----------
Total current assets........................................... 456,971
Property and equipment, net (notes 2 and 4)........................ 806,503
Other assets....................................................... 10,986
----------
Total assets................................................... $1,274,460
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current installments of long-term debt (note 3).................. $ 20,275
Current installments of obligations under capital leases (note
4).............................................................. 247,845
Accounts payable................................................. 121,245
Accrued payroll and related costs................................ 45,759
Income taxes payable (note 5).................................... 62,051
Other accrued liabilities........................................ 16,961
----------
Total current liabilities...................................... 514,136
Long-term liabilities:
Long-term debt, excluding current installments (note 3).......... 209,326
Obligations under capital leases, excluding current installments
(note 4)........................................................ 491,680
Deferred income taxes (note 5)................................... 82,965
----------
Total liabilities.............................................. 1,298,107
----------
Stockholders' deficit:
Common stock, no par value. Authorized 10,000 shares; issued and
outstanding 25 shares........................................... 24,000
Additional paid-in capital....................................... 33,325
Accumulated deficit.............................................. (80,972)
----------
Total stockholders' deficit.................................... (23,647)
----------
Total liabilities and stockholders' deficit.................... $1,274,460
==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-79
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Net revenue......................................................... $3,310,464
Cost of revenue..................................................... 2,364,355
----------
Gross profit.................................................... 946,109
Selling, general, and administrative expenses....................... 764,778
----------
Income from operations.......................................... 181,331
----------
Other income (expense):
Interest expense.................................................. (71,947)
Gain on sale of assets............................................ 18,670
Other............................................................. 34,834
----------
Income before income taxes...................................... 162,888
Income tax expense (note 5)......................................... 49,096
----------
Net income...................................................... $ 113,792
==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-80
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT DEFICIT
------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996....... $24,000 33,325 (194,764) (137,439)
Net income--1997................... -- -- 113,792 113,792
------- ------ -------- --------
Balance at December 31, 1997....... $24,000 33,325 (80,972) (23,647)
======= ====== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-81
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income........................................................ $ 113,792
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 177,150
Deferred income taxes........................................... (6,786)
Gain on sale of property and equipment.......................... (18,670)
Increase in trade accounts receivable........................... (88,313)
Increase in due from employees.................................. (1,376)
Increase in accounts receivable--other.......................... (1,366)
Increase in inventories......................................... (5,006)
Decrease in prepaid expenses.................................... 28,383
Decrease in accounts payable.................................... (11,932)
Increase in accrued payroll and related costs................... 17,020
Increase in income taxes payable................................ 38,517
Increase in other accrued liabilities........................... 7,191
---------
Net cash provided by operating activities..................... 248,604
---------
Cash flows from investing activities:
Purchases of property and equipment............................... (268,647)
Proceeds from sale of property and equipment...................... 52,938
---------
Net cash used in investing activities......................... (215,709)
---------
Cash flows from financing activities:
Proceeds from long-term debt...................................... 240,673
Principal payments on long-term debt and capital leases........... (211,134)
---------
Net cash provided by financing activities..................... 29,539
---------
Net increase in cash................................................ 62,434
Cash at beginning of year........................................... 75,779
---------
Cash at end of year................................................. $ 138,213
=========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest........................................................ $ 72,183
=========
Income taxes.................................................... $ 17,660
=========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-82
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
ASC Transportation Services and its wholly-owned subsidiary, Auto Service
Center (d/b/a ASC Truck Service), collectively referred to herein as "Auto
Service", and was founded in 1956, is a commercial and police towing company
with two facilities based in Sacramento, California. One facility concentrates
in the towing of commercial and personal vehicles primarily contracting with
law enforcement agencies and motor clubs. The other location concentrates on
the towing of larger commercial vehicles and maintains a repair shop also for
commercial vehicles. It operates approximately 20 vehicles.
(b) Principles of Consolidation
The consolidated financial statements include the financial statements of
ASC Transportation Services and its wholly-owned subsidiary, Auto Service
Center. All significant intercompany balances and transactions have been
eliminated in consolidation.
(c) Revenue Recognition
Auto Service operates as one segment related to the transportation of
vehicles and equipment for customers.
Auto Service's revenue is derived from customers who require a towing
service, transport of vehicles and equipment, and fees related to the repair
of vehicles that have been towed. Towing revenue is recognized at the
completion of each towing engagement, transport revenue is recognized upon the
delivery of the vehicles and equipment to their final destination, and repair
fees are recorded when the service is performed. Expenses related to the
generation of revenue are recognized as incurred.
(d) Inventories
Inventories consist principally of spare parts used for repair and
maintenance. Inventories are stated at the lower of cost or market.
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation is determined for
financial statement purposes using the straight-line method over the estimated
useful lives of the individual assets or, for leasehold improvements, over the
terms of the related leases if shorter. Accelerated methods of depreciation
have been used for income tax purposes. For financial statement purposes, Auto
Service provides for depreciation of property and equipment over the following
estimated useful lives:
<TABLE>
<S> <C>
Transportation and towing equipment............................... 5 years
Machinery and other equipment..................................... 7 years
Leasehold improvements............................................ 7-20 years
Furniture and fixtures............................................ 7 years
</TABLE>
(f) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to Auto Service on bank loans
with similar terms and maturities, the fair value of Auto Service's financial
instruments approximates their carrying values.
F-83
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(g) Income Taxes
Income taxes are accounted for under the asset and liability method.
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, and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted 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 of a change in tax
rates is recognized in income in the period that includes the enactment date.
(h) Use of Estimates
Management of Auto Service has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Transportation and towing equipment.............................. $1,425,655
Machinery and other equipment.................................... 169,403
Leasehold improvements........................................... 29,614
Furniture and fixtures........................................... 39,175
----------
Total............................................................ 1,663,847
Less accumulated depreciation and amortization................... (857,344)
----------
$ 806,503
==========
</TABLE>
Depreciation and amortization of property and equipment in 1997 totaled
$177,150.
(3) INDEBTEDNESS
Auto Service's long-term debt consisted of the following at December 31,
1997:
<TABLE>
<S> <C>
Note payable to bank, payable in monthly installments of $1,042,
including interest at 10.5%, maturing August 1998.............. $ 8,333
Note payable to unrelated individuals payable in monthly
installments of $2,794, including interest at 10%, maturing
November 2008. Guaranteed by the owners of Auto Service and
secured by a Pledge Agreement for all authorized shares of
stock of Auto Service.......................................... 221,268
--------
Total long-term debt.......................................... 229,601
Less installments due within one year........................... (20,275)
--------
Long-term debt, excluding current installments................ $209,326
========
</TABLE>
F-84
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Annual maturities of long-term debt for the next five years and thereafter
are as follows:
<TABLE>
<S> <C>
1998................................................................ $ 20,275
1999................................................................ 13,193
2000................................................................ 14,574
2001................................................................ 16,100
2002................................................................ 17,786
Thereafter.......................................................... 147,673
--------
$229,601
========
</TABLE>
(4) LEASES
Auto Service is obligated under various capital leases for vehicles,
equipment and furniture and fixtures that expire at various dates ranging
between January 1998 to August 2003.
Auto Service is obligated to the stockholder under a capital lease for a
vehicle through December 1999.
Following is a summary of property and equipment held under the capital
leases at December 31, 1997.
<TABLE>
<S> <C>
Transportation and towing equipment.............................. $1,136,544
Other equipment.................................................. 55,350
Furniture and fixtures........................................... 18,240
----------
1,210,134
Less accumulated amortization.................................... (519,886)
----------
$ 690,248
==========
</TABLE>
Auto Service leases the office building and a vehicle used for its
operations from the stockholder. These leases are classified as operating
leases and have been included in the data presented below. The building lease
is for an initial three-year term expiring in May 1998 with an option to renew
for five years. The lease was renewed on January 1997 and expires April 2003.
The vehicle lease has indefinite terms with a 30 day notice. Auto Service is
responsible for all operating costs related to these properties.
Auto Service also leases another building used for its operations from an
unrelated party. This lease is classified as an operating lease and is
included in the data presented below. The lease expires October 2002.
Total rent expense for 1997 was $151,393, including $64,654 paid to the
stockholder.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1997 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998..................................................... $310,859 106,800
1999..................................................... 253,159 106,800
2000..................................................... 132,122 106,800
2001..................................................... 85,626 106,800
2002..................................................... 68,505 98,500
Thereafter............................................... 28,795 19,000
-------- -------
Total.................................................. 879,066 544,700
=======
Less amount representing interest........................ (139,541)
--------
Present value of net minimum capital lease payments...... $739,525
========
</TABLE>
F-85
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) INCOME TAXES
Income tax expense for the year ended December 31, 1997 consists of:
<TABLE>
<S> <C>
Current:
Federal......................................................... $42,934
State........................................................... 12,948
-------
55,882
Deferred.......................................................... (6,786)
-------
$49,096
=======
</TABLE>
The following table reconciles the expected tax expense at the Federal
statutory tax rate to the effective tax rate.
<TABLE>
<S> <C>
Computed expected tax expense.................................... $ 55,382
State income taxes, net of Federal benefit....................... 8,546
Meals and entertainment.......................................... 1,372
Adjustment to prior years' taxes................................. (17,770)
Other............................................................ 1,566
--------
$ 49,096
========
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
liabilities as of December 31, 1997 are presented below:
<TABLE>
<S> <C>
Deferred tax liability:
Property and equipment, due to differences in depreciation lives
and methods.................................................... $82,965
-------
Net deferred tax liability.................................... $82,965
=======
</TABLE>
At December 31, 1996, the net deferred tax liability was $89,751 and there
was no recorded valuation allowance.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning strategies, as
well as carryback opportunities, in making this assessment. Based upon the
level of historical taxable income, projections for future taxable income and
carryback opportunities over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not Auto Service will
realize the benefits of these deductible differences. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income are reduced.
(6) NON-CASH TRANSACTIONS
During 1997, Auto Service leased $66,561 of certain vehicles through lending
institutions.
F-86
<PAGE>
ASC TRANSPORTATION SERVICES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) CONCENTRATION OF BUSINESS RISKS
For 1997, 33% of Auto Service's revenues were derived from one customer. The
loss of this customer could significantly effect Auto Service's performance.
(8) SUBSEQUENT EVENT
During February 1998, the stockholder entered into a definitive agreement to
sell Auto Service to United Road Services, Inc. The sales transaction,
affected through a combination of cash and common stock of United Road
Service, Inc., is contingent and effective upon the initial public offering of
the common stock of United Road Service, Inc. The anticipated selling price of
Auto Service exceeds its net assets as of December 31, 1997.
Concurrently with the acquisition, United Road Service, Inc. will enter into
agreements with the stockholder to lease land and buildings used in Auto
Service's operations for negotiated amounts and terms.
F-87
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
The Company............................................................... 15
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Selected Financial Data................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 32
Management................................................................ 39
Certain Transactions...................................................... 41
Principal Stockholders.................................................... 45
Description of Capital Stock.............................................. 46
Shares Eligible for Future Sale........................................... 49
Underwriting.............................................................. 50
Legal Matters............................................................. 51
Experts................................................................... 52
Additional Information.................................................... 52
Index to Financial Statements............................................. F-l
</TABLE>
-----------
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,500,000 SHARES
[LOGO] UNITED ROAD
SERVICES INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the Common Stock being registered
hereby, other than underwriting commissions and discounts.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
SEC registration fee........................................... $ 24,256
NASD approval fees and expenses................................ 12,628
Nasdaq National Market Listing Fee............................. 81,625
Printing and engraving expenses................................ 75,000*
Legal fees and expenses........................................ 180,000*
Accounting fees and expenses................................... 375,000*
Transfer Agent and Registrar fees.............................. 4,000*
Miscellaneous expenses......................................... 0
--------
Total........................................................ $752,509*
========
</TABLE>
--------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS,
The Company has included in its Certificate of Incorporation and Bylaws
provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by the General Corporation Law of the State of Delaware (the "DGCL")
and (ii) indemnify its directors and officers to the fullest extent permitted
by the DGCL, including circumstances in which indemnification is otherwise
discretionary.
Section 145 of the DGCL permits a corporation, under specified
circumstances, to indemnify its directors, officers, employees or agents
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlements actually and reasonably incurred by each in connection
with any action, suit or proceeding brought by third parties by reason of the
fact that they were or are directors, officers, employees or agents of the
corporation, if such directors, officers, employees or agents acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. In a
derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses (including attorneys' fees)
actually and reasonably incurred by directors, officers, employees or agents
in connection with the defense or settlement of an action or suit, and only
with respect to a matter as to which they shall have acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation, unless and
only to the extent that the court in which the action or suit was brought
shall determine upon application that the defendant directors, officers,
employees or agents are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
The Company has entered into Indemnification Agreements with its directors
and certain key officers pursuant to which the Company is generally obligated
to indemnify its directors and such officers to the full extent permitted by
the DGCL as described above.
The Company intends to purchase insurance for its directors and officers
indemnifying them against certain civil liabilities, including liabilities
under the federal securities laws, which might be incurred by them in such
capacity.
II-1
<PAGE>
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Company, its directors and officers, and by the Company of
the Underwriters, for certain liabilities, including liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act"), and affords
certain rights of contribution with respect thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The information in this Item 15 gives effect to a 100-for-1 split of the
Common Stock effected on December 29, 1997 and a 3.72-for-1 split of the
Common Stock effected on February 23, 1998.
Since its incorporation in July 1997, the Registrant has issued and sold the
following unregistered securities the purchasers of which were all accredited
investors:
(1) In August 1997, in connection with its formation, the Company issued
930,000 shares of Common Stock to each of Mark McKinney and Ross Berner for
aggregate cash consideration of $50,000.
(2) In November 1997, pursuant to a Stock Purchase and Restriction
Agreement between the Company and Edward T. Sheehan, the Company issued
744,000 shares of Common Stock to Mr. Sheehan for cash consideration of
$20,000.
(3) In January 1998, the Company issued an aggregate of 218,736 shares of
Common Stock to private investors for cash consideration of $735,000. Such
shares were issued pursuant to Subscription Agreements between the Company
and each of the investors.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act or
Regulation D promulgated thereunder as transactions by an issuer not involving
a public offering. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were attached to the share certificates issued in such
transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Northland Auto Transporters, Inc. and the
Stockholders named therein.(1)
2.2 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Northland Fleet Leasing, Inc. and the
Stockholders named therein.(1)
2.3 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Falcon Towing and Auto Delivery, Inc. and the
Stockholder named therein.(1)
2.4 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Smith-Christensen Enterprises, Inc. and City
Towing, Inc. and the Stockholder named therein.(1)
2.5 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Caron Auto Works, Inc. and the Stockholders
named therein.(1)
2.6 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Caron Auto Brokers, Inc. and the Stockholders
named therein.(1)
2.7 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Absolute Towing and Transporting, Inc. and the
Stockholder named therein.(1)
2.8 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Keystone Towing, Inc. and the Stockholder named
therein.(1)
2.9 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, ASC Transportation Services, Auto Service Center
and the Stockholders named therein.(1)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<C> <S>
2.10 Agreement and Plan of Reorganization dated as of February 23, 1998, by
and among the Company, Silver State Tow & Recovery, Inc. and the
Stockholder named therein.(1)
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation, as to the validity of the issuance of the
securities registered hereby.*
10.1 United Road Services, Inc. 1998 Stock Option Plan.
10.2 Form of Stock Purchase and Restriction Agreement between the Company
and Edward Sheehan.
10.3 Form of Employment Agreement between the Company and Edward T. Sheehan.
10.4 Form of Employment Agreement between the Company and Mark McKinney.
10.5 Form of Employment Agreement between the Company and Ross Berner.
10.6 Form of Employment Agreement between the Company and Allan D. Pass.
10.7 Form of Employment Agreement between the Company and Donald J. Marr.
10.8 Form of Employment Agreement between the Company and Edward Morawski.*
10.9 Form of Consulting Agreement between the Company and Todd Q. Smart.*
10.10 Form of Consulting Agreement between the Company and Mark Henninger.*
10.11 Form of Promissory Note between the Company and Mark McKinney.
10.12 Form of Promissory Note between the Company and Ross Berner.
10.13 Form of Registration Rights Agreement between the Company and
Stockholders named therein.*
10.14 Form of Indemnification Agreement.*
24.1 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation (included in Exhibit 5.1).
24.2 Consent of KPMG Peat Marwick LLP.
25.1 Powers of Attorney (included on signature page).
99.1 Consent of Grace M. Hawkins to be named as a director.
99.2 Consent of Mark Henninger to be named as a director.
99.3 Consent of Donald F. Moorehead, Jr. to be named as a director.
99.4 Consent of Edward Morawski to be named as a director.
99.5 Consent of Todd Q. Smart to be named as a director.
99.6 Consent of Edward Smith to be named as a director.
</TABLE>
- --------
*To be filed by amendment.
(1) Upon request, the Company will furnish supplementally to the Securities and
Exchange Commission a copy of omitted schedules.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements of the registrant or related
notes thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(5) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therewith, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Albany, State of New
York, on the day of , 1998.
United Road Services, Inc.
By: /s/ Edward T. Sheehan
---------------------------------
EDWARD T. SHEEHAN
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER
AND SECRETARY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Edward T. Sheehan and Mark McKinney and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution for him in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or
could do in person. Hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Edward T. Sheehan Chairman of the Board , 1998
- ------------------------- Chief Executive Officer,
EDWARD T. SHEEHAN and Secretary (Principal
Executive Officer)
/s/ Donald J. Marr Senior Vice President , 1998
- ------------------------- and Chief Financial
DONALD J. MARR Officer (Principal
Financial and Accounting
Officer)
/s/ Ross Berner Director , 1998
- -------------------------
ROSS BERNER
/s/ Mark McKinney Director , 1998
- -------------------------
MARK MCKINNEY
II-5
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
NORTHLAND AUTO TRANSPORTERS, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of
Directors of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 4
2.1 Manner of Conversion 4
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES 4
4. PRE-CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 9
5.8 Spin-off by the COMPANY 9
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 11
5.12 Permits and Intangibles 11
5.13 Environmental Matters 12
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and
Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
-i-
<PAGE>
Page
----
5.18 Compensation; Employment Agreements 15
5.19 Employee Plans 15
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 20
5.23 No Violations 23
5.24 Government Contracts 24
5.25 Absence of Changes 24
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 26
5.28 Relations with Governments 26
5.29 Disclosure 26
5.30 Authority; Ownership 27
5.31 Preemptive Rights 27
5.32 No Intention to Dispose of URSI Stock 27
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 27
6.2 URSI Stock 28
6.3 Validity of Obligations 28
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI STOCK 29
6.7 No Side Agreements 30
6.8 Subsidiaries 30
6.9 Business; Real Property; Material Agreements;
Financial Information 30
6.10 Conformity with Law 30
6.11 No Violations 31
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 33
7.3 Prohibited Activities 34
7.4 No Shop 35
7.5 Notice to Bargaining Agents 36
7.6 Termination of Plans 36
7.7 URSI Prohibited Activities 36
7.8 Notification of Certain Matters 37
7.9 Amendment of Schedules 37
-ii-
<PAGE>
Page
----
7.10 Cooperation in Preparation of Registration Statement 38
7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY 39
8.1 Representations and Warranties; Performance of
Obligations 39
8.2 Satisfaction 39
8.3 No Litigation 40
8.4 Stockholders' Release 40
8.5 Opinion of Counsel 40
8.6 Director Indemnification 40
8.7 Registration Statement 40
8.8 Consents and Approvals 41
8.9 Good Standing Certificates 41
8.10 No Waivers 41
8.11 No Material Adverse Change 41
8.12 Transfer Restrictions 41
8.13 Employment Agreements, Consulting Agreements,
Leases and Cosale Agreement 41
8.14 Tax Opinion 42
8.15 NFLC Closing 42
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 42
9.1 Representations and Warranties; Performance of
Obligations 42
9.2 No Litigation 42
9.3 Examination of Final Financial Statements 43
9.4 No Material Adverse Effect 43
9.5 STOCKHOLDERS' Release 43
9.6 Satisfaction 43
9.7 Termination of Related Party Agreements 43
9.8 Opinion of Counsel 43
9.9 Consents and Approvals 43
9.10 Good Standing Certificates 44
9.11 Registration Statement 44
9.12 Employment Agreements, Consulting Agreements and
Leases 44
9.13 Repayment of Indebtedness 44
9.14 FIRPTA Certificate 45
9.15 Insurance 45
-iii-
<PAGE>
Page
----
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS 45
10.1 Preservation of Tax and Accounting Treatment 45
10.2 Disclosure 46
10.3 Cooperation in Tax Return Preparation. 46
10.4 Tax Return Preparation and Filing 46
10.5 Reorganization Status Information Reporting 47
10.6 Special Definitions Related to Tax Matters 47
10.7 Directors 48
10.8 Release from Guarantees 48
10.9 Preservation of Plans 49
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS 49
11.2 Indemnification by URSI 50
11.3 Third Person Claims 50
11.4 Exclusive Remedy 52
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 54
11.7 Special Contest Rights Related to Tax Matters 56
11.8 Special Notification Requirements Regarding Tax
Disputes 57
11.9 Refunds 57
11.10 Optional Payment With Shares 57
12. TERMINATION OF AGREEMENT 58
12.1 Termination 58
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements 59
13. NONCOMPETITION 59
13.1 Prohibited Activities 59
13.2 Damages 60
13.3 Reasonable Restraint 60
13.4 Severability; Reformation 61
13.5 Independent Covenant 61
13.6 Materiality 61
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 61
14.1 STOCKHOLDERS 61
14.2 URSI 62
14.3 Damages 63
-iv-
<PAGE>
Page
----
14.4 Survival 63
15. TRANSFER RESTRICTIONS 63
15.1 Transfer Restrictions 63
15.2 Permitted Transferees 64
16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 65
16.2 Accredited Investors; Economic Risk; Sophistication 65
17. REGISTRATION RIGHTS 65
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 66
17.3 Registration Procedures 68
17.4 Underwriting Agreement 68
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 68
18. GENERAL 69
18.1 Cooperation 69
18.2 Successors and Assigns 69
18.3 Entire Agreement 69
18.4 Counterparts 69
18.5 Brokers and Agents 69
18.6 Expenses 70
18.7 Notices 71
18.8 Governing Law; Forum 72
18.9 Survival of Representations and Warranties 72
18.10 Exercise of Rights and Remedies 72
18.11 Time 72
18.12 Reformation and Severability 72
18.13 Remedies Cumulative 73
18.14 Captions 73
-v-
<PAGE>
SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
-vi-
<PAGE>
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
-vii-
<PAGE>
TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
-viii-
<PAGE>
Material Documents 5.23
Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
NFLC 5.1
NFLC Agreement 11.1
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
-ix-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), NORTHLAND AUTO TRANSPORTERS, INC., a Michigan
corporation (the "COMPANY"), and the stockholders listed on Annex II (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., ASC Transportation Services, Caron Auto Brokers, Inc., Caron
Auto Works, Inc., Falcon Towing and Auto Delivery, Inc., George Little
Investments, Inc., Keystone Towing, Northland Fleet Leasing Company, Silver
State Tow & Recovery, Inc. and Smith-Christensen Enterprises, Inc. (the "Other
Companies") in order to acquire additional vehicle towing and transport
companies (the Other Companies, together with the COMPANY, are collectively
referred to herein as the "Founding Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
State of the State of Delaware and, if required, the Articles of Merger or a
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similar document to be signed, verified and filed with the relevant authorities
in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
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(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 1,000 shares of common stock with a par value of
$1.00, ("COMPANY Stock"), of which 1,000 shares are issued and outstanding; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
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2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of
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such certificates, be entitled to receive the number of shares of URSI Stock and
the amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as set forth in Section 2.2,
notwithstanding the number of shares of COMPANY Stock such certificates
represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of
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URSI Stock, and the delivery of a certified check or checks in an amount equal
to the cash portion of the consideration which the STOCKHOLDERS shall be
entitled to receive pursuant to the Merger, shall occur and be deemed to be
completed. If so requested by any STOCKHOLDER at or prior to the Pre-Closing,
URSI will use its best efforts to cause all cash to be paid to such STOCKHOLDER
on the CLOSING DATE to be paid by the Underwriters (as defined in Section 5.29)
by initiating a wire transfer payment pursuant to instructions included in
STOCKHOLDER's request. After the Pre-Closing and until the Closing Date, no
party may withdraw, terminate or rescind any delivery made at the Pre-Closing
unless this Agreement is terminated as provided in Section 12. All documents
delivered at the Pre-Closing shall be held by Howard Rice for final delivery on
the Closing Date as directed by the parties and their counsel at the
Pre-Closing, provided only that the Articles of Merger and any similar document
may be filed to become effective on the Closing Date. Should the Agreement be
terminated as provided in Section 12 prior to the Closing Date, the parties
shall take all steps necessary to rescind any such filings, Howard Rice shall
return all documents delivered at the Pre-Closing to the parties who delivered
the same, all such deliveries at the Pre-Closing will be rescinded and a
nullity, the Merger shall not become effective, the shares of COMPANY Stock will
not be converted into URSI Stock, and shares of URSI Stock will not be delivered
to STOCKHOLDERS. The documents delivered at Pre-Closing shall include documents
required to rescind, prior to the Closing Date, any filing of the Articles of
Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
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until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and Northland Fleet Leasing Company, a Michigan corporation
("NFLC") and the COMPANY's and NFLC's Subsidiaries, taken as a whole (a
"Material Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in
which the COMPANY is authorized or qualified to do business. True, complete and
correct copies of the Certificate of Incorporation and Bylaws, each as amended,
of the COMPANY and each of the COMPANY's Subsidiaries (collectively, the
"Charter Documents"), certified by the Secretary or Assistant Secretary of the
COMPANY, are all attached hereto as Schedule 5.1. A true, complete and correct
copy of each Certificate of Incorporation included in the Charter Documents,
certified by the Secretary of State or other appropriate authority of the state
of incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further,
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except as set forth on Schedule 5.3, are owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the issued and outstanding shares of the
capital stock of the COMPANY have been duly authorized and validly issued, are
fully paid and nonassessable, are owned of record and beneficially by the
STOCKHOLDERS and further, such shares were offered, issued, sold and delivered
by the COMPANY in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
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5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY ("Affiliates") other
than in the ordinary course of business, within the preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the combined Balance Sheet of the COMPANY and NFLC as of December 31,
1997 and 1996 and the related combined Statements of Operations, Cash Flows and
Retained Earnings for each of the years in the three-year period ended December
31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet
Date"). Such Financial Statements have been prepared in accordance with KPMG
Peat Marwick LLP's interpretation of generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as
noted). Except as set forth on Schedule 5.9, such Balance Sheets as of December
31, 1997 and 1996 present fairly the combined financial position of the COMPANY
and NFLC (and each of the COMPANY's Subsidiaries on a consolidated basis) as of
the dates indicated thereon, and such Statements of Operations, Cash Flows and
Retained Earnings present fairly the results of their combined operations for
the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature
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described in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items
subject to any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such balance
sheet were being prepared immediately prior to Closing or if such liabilities
represent liabilities of the nature described in Section 5.13, Section 5.20
and/or Section 5.22 (excluding items subject to any knowledge qualifications
contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
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(c) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the amount shown on Schedule 5.11, net of
reserves reflected in the balance sheet as of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
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5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or Hazardous Substances and have reported, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY or any of the COMPANY's Subsidiaries where Solid Wastes,
Hazardous Wastes or Hazardous Substances have been treated, stored, used,
disposed of or otherwise handled; (iii) there have been no releases (as defined
in Environmental Laws) at, from, under, in or on any property owned or operated
by the COMPANY or any of the COMPANY's Subsidiaries except as permitted by
Environmental Laws; (iv) to the knowledge of the COMPANY there is no on-site or
off-site location to which the COMPANY or any of the COMPANY's Subsidiaries has
transported or disposed of Solid Wastes, Hazardous Wastes or Hazardous
Substances or arranged for the transportation of Solid Wastes, Hazardous Wastes
or Hazardous Substances, which site is the subject of any federal, state, local
or foreign enforcement action or any other investigation which could lead to any
claim against the COMPANY, any of the COMPANY's Subsidiaries or URSI for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) to the
knowledge of the COMPANY the COMPANY has no contingent liability in connection
with any release of any Solid Waste, Hazardous Waste or Hazardous Substance into
the environment. Schedule 5.13 lists all releases of Hazardous Wastes or
Hazardous Substances by the COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date
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and (ii) acquired since the Balance Sheet Date, and (z) all leases for real and
personal property to which the COMPANY or any of its subsidiaries is a party
involving real or personal property having a value in excess of $2,500,
including in the case of (z) true, complete and correct copies of all such
leases and including in cases (x), (y) and (z) an indication as to which real
and personal property is currently owned, or was formerly owned, by STOCKHOLDERS
or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as
shown on Schedule 5.14, all of the trucks and other material machinery and
equipment of the COMPANY and the COMPANY's Subsidiaries listed on Schedule 5.14
are in good working order and condition, ordinary wear and tear excepted. All
leases set forth on Schedule 5.14 are in full force and effect and constitute
valid and binding agreements on the COMPANY (or a COMPANY Subsidiary, as
applicable), and to the knowledge of the COMPANY, constitute valid and binding
agreements on the other parties thereto (and their successors) thereto in
accordance with their respective terms. All fixed assets used by the COMPANY and
the COMPANY's Subsidiaries that are material to the operation of their
respective businesses are either owned by the COMPANY or the COMPANY's
Subsidiaries or leased under an agreement indicated on Schedule 5.14. Schedule
5.14 shall, without limitation, contain true, complete and correct copies of all
title reports and title insurance policies received or owned by the COMPANY or
the COMPANY's Subsidiaries. The COMPANY has also provided in Schedule 5.14 a
summary description of all plans or projects which have been memorialized in any
written or electronic document or file and involves the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business, with respect to which the COMPANY (or any of the
COMPANY's Subsidiaries) has made any expenditure in the two-year period prior to
the date of the Agreement in excess of $10,000, or which if pursued by the
COMPANY (or such Subsidiary) would require additional expenditures of capital in
excess of $10,000. Except as set forth on Schedule 5.14 and except for liens
excepted in Section 7.3(vi)(1) and (3), there are no liens against the COMPANY's
properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective
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properties are bound (including, but not limited to, contracts with significant
customers, joint venture or partnership agreements, contracts with any labor
organizations, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, leases, liens, pledges or other security
agreements) (a) as of the Balance Sheet Date and (b) entered into since the
Balance Sheet Date, and in each case has delivered true, complete and correct
copies of such agreements to URSI, except that leases set forth on Schedule 5.14
need not be set forth on Schedule 5.15. Except to the extent set forth on
Schedule 5.15, (i) none of the COMPANY's (including the COMPANY's Subsidiaries)
significant customers has cancelled or substantially reduced or, to the
knowledge of the COMPANY, is currently attempting or threatening to cancel any
Material Contract or substantially reduce utilization of the services provided
by the COMPANY (including the COMPANY's Subsidiaries), and (ii) the COMPANY and
the COMPANY's Subsidiaries have complied with all material commitments and
obligations pertaining to any Material Contract, and are not in default under
any such Material Contract, and no notice of default has been received, and no
Stockholder or any affiliate of any Stockholder is a party to any such Material
Contract. Except as set forth in Schedule 5.15, the COMPANY and the COMPANY's
Subsidiaries have not been the subject of any election in respect of union
representation of employees and are not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union. Except as set forth on Schedule 5.15, no employees of the
COMPANY or its Subsidiaries are represented by any labor union or covered by any
collective bargaining agreement and no campaign to establish such representation
has ever occurred or is in progress. There is no pending or, to the COMPANY's
knowledge, threatened labor dispute involving the COMPANY (including the
COMPANY's Subsidiaries) and any group of its employees, nor has the COMPANY
(including the COMPANY's Subsidiaries) experienced any labor interruptions over
the past three years, and the COMPANY considers its relationship with employees
to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been
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cancelled by the insurance company, and the COMPANY (including such COMPANY's
Subsidiaries) has never submitted a written application for insurance and been
denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
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(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment
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period permitting retroactive amendment of such Qualified Plans has not expired
and will not expire within one hundred twenty (120) days after the Closing Date.
All reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, annual reports, summary annual reports, actuarial reports, PBGC-1
Forms, audits or tax returns) have been timely filed or distributed. None of:
(i) the STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further, except as set
forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
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assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
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(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has
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been received. The COMPANY (including all of the COMPANY's Subsidiaries) has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations
and is not in violation of any of the foregoing which would have a Material
Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
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Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the meaning of Section
168 of the Code. No Acquired Party is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986, or to any "long-term contract"
within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
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(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-Closing
Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of the transaction. Moreover, shares of
COMPANY Stock and shares of URSI Stock held by STOCKHOLDERS and otherwise sold,
redeemed, or disposed of on or after January 1, 1997, including after the
Closing Date, will be considered in making this representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
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(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any
STOCKHOLDER-employees of the COMPANY will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not exceed 7.5% of
the aggregate consideration to be received by such STOCKHOLDERS pursuant to the
Merger.
(xxvi) Intentionally Omitted.
(xxvii) Intentionally Omitted.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
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knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
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(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
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Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or
associated with the COMPANY for any failure of the Registration Statement to
become effective, or of the IPO to occur at a particular price or within a
particular range of prices or to occur at all; and (iii) the decision of
STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent to
the proposed Merger, has been made independent of, and without reliance upon,
any statements, opinions or other communications of, or due diligence
investigations which have been or will be made or performed by any prospective
Underwriter, relative to URSI or the prospective IPO. The Underwriters shall
have no obligation to the STOCKHOLDERS with respect to any disclosure contained
in the Registration Statement.
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(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
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authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
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(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly issued, fully paid and nonassessable. All of the shares of
URSI Stock issued to persons set forth on Annex III and, based on the
representations of STOCKHOLDERS contained in this Agreement and in the documents
delivered to URSI pursuant hereto, to STOCKHOLDERS pursuant to this Agreement,
were or will be offered, issued, sold and delivered by URSI in compliance with
all applicable state and federal laws concerning the issuance of securities and
none of such shares were or will be issued in violation of the
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preemptive rights of any past or present stockholder. On the Closing Date the
capitalization of URSI will be as set forth in the Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or contingent, other than those incurred in connection with
this Agreement, the Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a
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URSI Material Adverse Effect. There are no claims, actions, suits or
proceedings, pending or, to the knowledge of URSI, threatened, against or
affecting URSI, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. URSI (including URSI's Subsidiaries) has conducted and is conducting
its business in compliance with the requirements, standards, criteria and
conditions set forth in applicable Federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing which would have a URSI Material Adverse
Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
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(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY after the Merger will be separate consideration for, or allocable
to, any of their shares of the COMPANY; none of the shares of URSI Stock
received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may
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be required in connection with any documents or materials required by this
Agreement. URSI, the STOCKHOLDERS and the COMPANY will treat all information
obtained in connection with the negotiation and performance of this Agreement or
the due diligence investigations conducted with respect to the Founding
Companies other than the COMPANY as confidential in accordance with the
provisions of Section 14 hereof. In addition, URSI will cause each of the
Founding Companies other than the COMPANY to enter into a provision similar to
this Section 7.1 requiring each such Founding Company to keep confidential any
information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
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(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level
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higher than one hundred ten percent (110%) of such employee's current salary or
bonus, whichever is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely affect
the Tax liability of the Company or any Acquired Party (or URSI following the
Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
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(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or
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otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-Closing, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. In the event that the COMPANY amends or supplements
a Schedule pursuant to this Section 7.9, and URSI and a majority of the Founding
Companies do not consent to the effectiveness of such amendment or supplement at
or before the Pre-Closing, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. In the event that URSI amends or
supplements a Schedule pursuant to this Section 7.9 and COMPANY and a majority
of the Founding Companies do not consent to the effectiveness of such amendment
or supplement at or before the Pre-Closing, this Agreement shall be deemed
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terminated by mutual consent as set forth in Section 12.1(i) hereof. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.9. In the event that one of the other
Founding Companies amends or supplements a Schedule pursuant to Section 7.9 of
one of the Other Agreements, URSI shall give the COMPANY notice promptly after
it has knowledge thereof. If URSI, COMPANY and a majority of the Founding
Companies do not consent to the effectiveness of such amendment or supplement at
or before the Pre-Closing, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. For purposes of this Section
7.9, URSI shall be deemed to have given its consent to the effectiveness of any
amendment or supplement to a Schedule if URSI does not notify COMPANY of its
disapproval within 48 hours after URSI is notified of such amendment or
supplement, and COMPANY and each other Founding Company shall be deemed to have
given its consent to the effectiveness of any amendment or supplement to a
Schedule if COMPANY or such other Founding Company, as applicable, does not
notify URSI of its disapproval within 48 hours after COMPANY or such other
Founding Company, as applicable, is notified of such amendment or supplement.
Except as otherwise provided herein, no amendment of or supplement to a Schedule
shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
combined financial statements of the COMPANY and NFLC for any quarter subsequent
to December 31, 1997 are required to be included in the Registration Statement,
the COMPANY shall provide, and URSI shall have had sufficient time to review,
the unaudited combined balance sheet and statements of income, cash flows and
retained earnings of the COMPANY and NFLC as of the end of such quarter,
disclosing no Material Adverse Change in
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the combined financial condition or results of operations of the COMPANY and
NFLC. Such financial statements, which shall be deemed to be Financial
Statements (as described in Section 5.9), shall have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted therein). To the extent such
Financial Statements shall be included or reflected in the Registration
Statement, any events or circumstances reflected therein which might constitute
a Material Adverse Effect with respect to the COMPANY and NFLC shall be deemed
to have been waived by URSI and URSI shall have no rights in respect of such
Material Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced
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prior to the initial filing with the Securities and Exchange Commission (the
"SEC") the effectiveness thereof and the filing with the SEC of any amendment or
supplement thereto after the effectiveness thereof (including any prospectus
filed pursuant to Rule 424 under the 1933 Act) and (ii) the COMPANY or
STOCKHOLDERS shall have failed to inform URSI in writing prior to the filing or
the effectiveness thereof, as the case may be, of the existence of an untrue
statement of a material fact or the omission of such a statement of a material
fact, provided however, that for the period commencing 72 hours prior to any
such filing or effectiveness, URSI can make such draft or changed pages
available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of
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URSI Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements,
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Consulting Agreements and Leases (all as defined in Section 9.12); and Ed
Sheehan, Mark McKinney and Ross Berner shall have entered into a cosale
agreement for the benefit of the Stockholders and the stockholders of Other
Companies in the form attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
8.15 NFLC Closing. NFLC shall be acquired by URSI on the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of URSI as a result of which the
management of URSI deems it inadvisable to proceed with the transactions
hereunder.
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9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY and NFLC for the fiscal quarters beginning after the
Balance Sheet Date, and the unaudited consolidated combined statement of income,
cash flows and retained earnings of the COMPANY and NFLC for the fiscal quarters
beginning after the Balance Sheet Date, disclosing no material adverse change in
the combined financial condition of the COMPANY and NFLC or the results of their
operations from the financial statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from
Mathieson, Parr, Schuler, Ewald & Jolly, LLP, counsel to the COMPANY and the
STOCKHOLDERS, dated the Pricing Date, in the form annexed hereto as Annex VI,
and the Underwriters shall have received a copy of the same opinion addressed to
them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the COMPANY
shall have obtained and delivered to URSI such additional
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consents to the Merger as URSI may reasonably request including, without
limitation, URSI's receipt on or prior to the Pricing Date of those licenses,
franchises, permits or governmental authorizations set forth on Schedule 5.12
pursuant to the last sentence of Section 5.12, or assurances reasonably
acceptable to it that such licenses, franchises, permits or governmental
authorizations will be received on the Closing Date or that the failure to
receive such licenses, franchises, permits or governmental authorizations on the
Closing Date will not adversely affect its ability to conduct the business of
the Company as conducted prior to the Closing Date; and no action or proceeding
shall have been instituted or threatened to restrain or prohibit the Merger and
no governmental agency or body shall have taken any other action or made any
request of URSI as a result of which URSI deems it inadvisable to proceed with
the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
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9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
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10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses,
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losses, deductions, and credits of the COMPANY and any Acquired Party in a
manner consistent with prior practice and in a manner that apportions such
income, gain, expenses, loss, deductions and credits equitably from period to
period and (b) prepare such Tax Returns in a manner consistent with prior years,
in each case as determined in the good faith judgment of the preparer of such
returns; provided, however, that in all events such Tax Returns shall be
prepared in a manner consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(b) "Interim Period" shall mean any taxable period commencing
prior to the Closing Date and ending after the Closing Date.
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(c) "Pre-Closing Period" shall mean (i) any taxable period
that begins before the Closing Date and ends on or before the Closing Date and
(ii) the portion of any Interim Period through and including the Closing Date.
(d) "Post-Closing Period" means any taxable period that begins
after the Closing Date, and, with respect to any Interim Period, the portion of
such Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income,
gross receipts, ad valorem, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A), customs duties, capital stock, net worth, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, workers compensation, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government,
including any interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations,
claims for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, having or purporting to have jurisdiction with respect to
any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such guarantees on indebtedness
being assumed by URSI. URSI agrees to indemnify the STOCKHOLDERS against any and
all claims made by lenders under such guarantee which arise as a result of
URSI's failure to cause such guarantee to be released on or prior to the
Closing.
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10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify under Section 401(a) of the Code and makes contributions to such plan
at or above the level stated in Schedule 10.9, or (ii) in the case of each other
Plan, URSI establishes a replacement Plan providing equivalent or better
benefits, provided that if the cost of providing equivalent benefits should, in
the good faith judgment of URSI, become commercially unreasonable, the
replacement plan established by URSI may have benefits that are, in the good
faith judgment of URSI, as close to equivalent as can be obtained at
commercially reasonable cost. There are no intended third party beneficiaries of
this Section 10.9, and after the Closing Date it can be waived or modified by
URSI and STOCKHOLDERS (or their successors) shown as owning two-thirds of
COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except with respect to
Sections 5.30 through 5.32, which shall be several), will indemnify, defend,
protect and hold harmless URSI, the COMPANY and the Surviving Corporation at all
times from and after the date of this Agreement until the Expiration Date as
defined in Section 5 above, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by URSI, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith (other than the
representations and warranties provided in Section 5.22, for which Section 11.6
provides special indemnity provisions); (ii) any nonfulfillment of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, (x) arising out of or based upon any
untrue statement of a material fact relating to the COMPANY (including the
COMPANY's Subsidiaries) or the STOCKHOLDERS that is provided to URSI or its
counsel by the COMPANY or the STOCKHOLDERS and contained in any preliminary
prospectus relating
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to the IPO, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, or (y) arising out of or based
upon any omission to state therein a material fact relating to the COMPANY
(including the COMPANY's Subsidiaries) or the STOCKHOLDERS that is required to
be stated therein or necessary to make the statements therein not misleading,
and not provided to URSI or its counsel by the COMPANY or the STOCKHOLDERS,
provided, however, that such indemnity shall not inure to the benefit of URSI,
the COMPANY or the Surviving Corporation to the extent that such untrue
statement (or alleged untrue statement) was made in, or omission (or alleged
omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided,
in writing, corrected information to URSI counsel and to URSI for inclusion in
the final prospectus, and such information was not so included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect
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thereto being made against any party obligated to provide indemnification
pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"),
give the Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall state the nature and the basis of
such claim and a reasonable estimate of the amount thereof. The Indemnifying
Party shall have the right to defend and settle, at its own expense and by its
own counsel, any such matter so long as the Indemnifying Party pursues the same
in good faith and diligently, provided that the Indemnifying Party shall not
settle any criminal proceeding without the consent of the Indemnified Party. If
the Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by Indemnifying Party,
provided that if such counsel shall have a conflict of interest that prevents
such counsel from representing Indemnified Party, Indemnified Party shall have
the right to participate in such matter through counsel of its own choosing and
Indemnifying Party will reimburse the Indemnified Party for the expenses of its
counsel. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a final
and complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim and all additional costs
of settlement or judgment. If the Indemnifying Party does not undertake to
defend such matter as to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such
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settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. All settlements hereunder shall effect a complete release
of the Indemnified Party, unless the Indemnified Party otherwise agrees in
writing. The parties hereto will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Section, provided that no Indemnifying
Party shall be obligated to seek any payment pursuant to the terms of any
insurance policy. All indemnification payments under this Section shall be
deemed adjustments to the Merger consideration provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement plus the aggregate value of the consideration paid to the
stockholders of NFLC pursuant to Section 2.2 of the Agreement and Plan of
Reorganization among URSI, NFLC and the stockholders of NFLC ("NFLC Agreement")
unless this Agreement is terminated prior to the Closing Date, in which event
the Indemnification Threshold is an amount equal to two percent (2%) of the
Minimum Value set forth in Annex I. All such amounts otherwise payable by one or
more STOCKHOLDERS in excess of the amount so offset and reduced shall be paid
without offset or reduction pursuant to this Section 11.5(i). This Section
11.5(i) shall not apply to amounts payable pursuant to Section 11.6. For
purposes of determining the Indemnification Threshold, the URSI Stock shall be
valued at the initial price of the URSI Stock sold to the public in the IPO.
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(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no event shall any STOCKHOLDER be
liable under this Agreement, including this Section 11, and the NFLC Agreement
to pay more than one-half the amount of the proceeds received by such
STOCKHOLDER pursuant to this Agreement and the NFLC Agreement, calculated as
provided in Section 11.5(iv), with respect to Specially Limited Claims and
"Specially Limited Claims" as such term is defined in the NFLC Agreement.
Specially Limited Claims are all claims that may be made pursuant to this
Agreement, including this Section 11, except claims based on (a) breach of
representations and warranties in Section 5.13, (b) breach of representations
and warranties in Section 5.19 or Section 5.20 or (c) Section 11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, and the
NFLC Agreement for amounts which in the aggregate exceed the amount of proceeds
received by such STOCKHOLDER pursuant to this Agreement and the NFLC Agreement.
The amount of proceeds received by each STOCKHOLDER pursuant to this Agreement
shall be calculated (for purposes of Section 11.5(iii) and this Section
11.5(iv)) by adding (a) the cash proceeds paid to such STOCKHOLDER pursuant to
Section 2.2 hereof prior to the date that the indemnity obligation of such
STOCKHOLDER is paid, plus (b) the net proceeds to such STOCKHOLDER from the sale
of such STOCKHOLDER's URSI Stock received pursuant to Section 2.2 hereof prior
to the date that the indemnity obligation of such STOCKHOLDER is paid, plus (c)
the Fair Market Value (as defined in Annex I) of the unsold shares of URSI
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Stock received by such STOCKHOLDER pursuant to Section 2.2 prior to the date
that the indemnity obligation of such STOCKHOLDER is paid, valued on the trading
day prior to the day the indemnification obligation is paid. The amount of
proceeds received by a STOCKHOLDER under the NFLC agreement shall be determined
as set forth in Section 11.5(iv) thereof.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first been
provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and all Taxes
(including without limitation any obligation to contribute to the payment of, or
be entitled to share in the refund of, a Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that includes
or included the COMPANY or any Acquired Party) which are
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(i) imposed on any member (other than the COMPANY or any Acquired Party) of the
consolidated, unitary or combined group which includes or included the COMPANY
or any Acquired Party or (ii) imposed on the COMPANY or any Acquired Party in
respect of its income, business, property or operations or for which the COMPANY
or any Acquired Party may otherwise be liable (A) for any Pre-Closing Period,
(B) resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to any items of income or gain of an
entity treated as a partnership reported by the COMPANY or any Acquired Party as
a partner, to the extent such items are properly attributable to periods of the
"partnership" ending on or before the Closing Date, or (G) attributable to any
discharge of indebtedness that may result from any capital contributions by
STOCKHOLDERS (or an affiliate of STOCKHOLDERS) to the COMPANY or any Acquired
Party of any intercompany indebtedness owed by COMPANY to any STOCKHOLDER (or an
affiliate of any STOCKHOLDER), but, in each case, only to the extent such Taxes
or the entitlement to such refund are not reflected on the applicable Company
Financial Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv) or Section 5.22(xxv) and (y) any liability imposed
on URSI, the COMPANY and any Acquired Party (or any affiliate of such companies)
attributable to any breach of a warranty or representation made by STOCKHOLDERS
in Section 5.22, excluding Section 5.22(xx), Section 5.22(xxiv) and Section
5.22(xxv).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party
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with respect to any Post-Closing Period and (y) any liability imposed on
STOCKHOLDERS attributable to any breach of a warranty or representation made by
URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
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to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being
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valued at Fair Market Value on the trading day prior to the day the
indemnification obligation is paid. No STOCKHOLDER will be entitled to make
payment with any other shares of URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre-Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
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representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
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(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations
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under this Section 13, if any, such STOCKHOLDER shall not be chargeable with a
violation of this Section 13 if URSI and/or any subsidiary thereof shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against URSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
URSI of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in this Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto, except that upon URSI's admission in
writing, or a final judicial determination which is not the subject of appeal or
further appeal by URSI, that URSI has materially breached a STOCKHOLDER's
Employment Agreement (if applicable), right to have URSI Stock registered under
the 1933 Act pursuant to Section 17.1 or 17.2, or right to receive contingent
consideration as provided in section C of Annex I, and URSI's failure to cure
such material breach within 30 days of such admission or final judicial
determination, whichever is applicable, then the covenants contained in this
Section 13 with respect to such STOCKHOLDER will expire. The covenants contained
in this Section 13 shall have no effect if the transactions contemplated by this
Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may
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possibly have, access to certain confidential information of the COMPANY and/or
URSI, such as lists of customers, operational policies, and pricing and cost
policies that are valuable, special and unique assets of the COMPANY's and/or
URSI's respective businesses. The STOCKHOLDERS agree that they will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except (a) to authorized
representatives of URSI, (b) following the Closing Date, as required in the
course of performing their duties for URSI, and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 14.1; provided, further, that
confidential information shall not include (i) such information which becomes
known to the public generally through no fault of the STOCKHOLDERS, (ii)
information required to be disclosed by law or the order of any governmental
authority under color of law, provided that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give prior
written notice thereof to URSI and provide URSI with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
STOCKHOLDERS of the provisions of this section, URSI shall be entitled to an
injunction restraining such STOCKHOLDERS from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
URSI from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the
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defense of a lawsuit against the disclosing party. Upon termination of this
Agreement prior to the Closing Date for any reason other than the material
breach or default of any STOCKHOLDER or COMPANY, URSI will return to COMPANY all
documents containing confidential information of COMPANY that were provided to
URSI by COMPANY or STOCKHOLDERS and all summaries, abstractions, projections,
pro formas or like material prepared by URSI incorporating such confidential
information. In the event of a breach or threatened breach by URSI of the
provisions of this section, the COMPANY and the STOCKHOLDERS shall be entitled
to an injunction restraining URSI from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANY and the STOCKHOLDERS from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set
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forth below and containing such other information as URSI may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel) by the terms
and conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which a majority of the interests therein by
value is owned by the STOCKHOLDER and members of the STOCKHOLDER's family, and
(y) which is and continues to be controlled by the STOCKHOLDER and members of
the STOCKHOLDER'S family for the period set forth in Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
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16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests,
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provided that URSI shall have the right to reduce the number of shares included
in such registration to the extent that inclusion of such shares could, in the
opinion of tax counsel to URSI or its independent auditors, jeopardize the
status of the transactions contemplated hereby and by the Registration Statement
as a reorganization described in Section 368(a)(1)(A) of the Code. In addition,
if URSI is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 17.1 that the number of shares to be
sold by persons other than URSI is greater than the number of such shares which
can be offered without adversely affecting the offering, URSI may reduce the
number of shares offered for the accounts of such persons to a number deemed
satisfactory by such managing underwriter, provided that such reduction shall be
made first by reducing the number of shares to be sold by persons other than
URSI, the stockholders named on Annex III hereto, the stockholders of the
Founding Companies, and any person or persons who have required such
registration pursuant to "demand" registration rights granted by URSI;
thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of URSI Stock owned by such stockholder
immediately after the Closing, provided that if any stockholder does not wish to
sell all shares such stockholder is permitted to sell, the opportunity to sell
additional shares shall be reallocated in the same manner to those stockholders
named in Annex III hereto and stockholders of the Founding Companies who wish to
sell more shares until no more shares can be sold by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as
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practicable, file and use its best efforts to cause to become effective a
registration statement covering all such shares. URSI will use its best efforts
to keep such Demand Registration current and effective for one hundred twenty
(120) days (or such shorter period during which holders shall have sold all URSI
Stock which they requested to be registered). URSI shall be obligated to effect
only two (2) Demand Registrations for all Founding Stockholders, and the second
request may not be made until at least one (1) year after the effective date of
the registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER may request in writing
that URSI file a registration statement under the 1933 Act requesting such
number of such STOCKHOLDER's shares of URSI Stock as is required to be sold to
pay the difference between the cash proceeds and the amount of the
indemnification obligation, plus legal and other expenses, including expenses of
the offering, provided arrangements are made to URSI's reasonable satisfaction
that the proceeds will be used solely for the purpose of such indemnification
and the payment of related expenses and that arrangements are made to the
reasonable satisfaction of URSI that the proceeds of such sale will be used
solely for the purpose of such indemnification and the payment of related
expenses, and that no such request may be made until after one hundred eighty
(180) days following the Closing Date without the consent of the managing
underwriter.
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17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the
Pre-Closing and Closing Date until December 31, 2001.
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18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be modified or amended only by a written instrument
executed by the STOCKHOLDERS, the COMPANY and URSI, acting through their
respective officers, duly authorized by their respective Boards of Directors.
Any disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all
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loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the STOCKHOLDERS and incurred
prior to the Pricing Date may be paid from COMPANY funds rather than from
personal funds of the STOCKHOLDERS, provided that the STOCKHOLDERS provide to
URSI, prior to the Pricing Date, a detailed statement setting forth the type and
amount of all such fees, expenses or disbursements so paid, and, provided
further, that the aggregate amount of same shall be deducted, on a
dollar-for-dollar basis, from the amount of cash into which the COMPANY Stock
shall be converted pursuant to Section 2.2 hereof. Notwithstanding the foregoing
provisions of Section 18.6, URSI shall further pay or reimburse reasonable costs
of counsel or co-counsel for the Company if and to the extent so mutually agreed
in advance between URSI and such counsel, in circumstances where URSI believes
it obtained or may have obtained a material benefit, in light of market
conditions and other factors, by reason of such counsel or co-counsel expediting
the transaction which is the subject of this Agreement and reducing the time
required to complete this Agreement and the Other Agreements.
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18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
Northland Auto Transporters, Inc.
31299 Mally Drive
Madison Heights, MI 48071
Attn: Edward W. Morawski
and marked "Personal and Confidential" with copies to:
John Stevens, Esq.
Mathieson, Parr, Schuler, Ewald & Jolly, LLP
2555 Crooks
Troy, MI 48084
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery
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will be effective upon actual receipt by the party or an officer, general
partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the
Michigan state court of general jurisdiction in Oakland County, Michigan (or, if
there is federal jurisdiction, then the exclusive jurisdiction and venue of the
United States District Court having jurisdiction over Oakland County). The
parties hereby consent to the personal and exclusive jurisdiction and venue of
said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
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either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
____________________________________ By ___________________________________
Name:
Title:
WITNESS: STOCKHOLDERS:
____________________________________ ______________________________________
Edward W. Morawski
WITNESS: NORTHLAND AUTO
TRANSPORTERS, INC.
____________________________________ By ___________________________________
Name:
Title:
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ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
NORTHLAND AUTO TRANSPORTERS, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $7,061,226 in cash.
2. 588,435 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $14,122,452.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate
the Merger if the aggregate value of cash and URSI Stock (valued at the IPO
initial public offering price) is less than the Minimum Value of $13,239,798.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
Edward W. Morawski 588,435 $7,061,226
------- ----------
TOTALS: 588,435 $7,061,226
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 1 Excess Revenues are greater than zero, then:
<PAGE>
a. Four and one-quarter percent (4.25%) of Year 1 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 1 Payout Date.
b. Four and one-quarter percent (4.25%) of Year 1 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 2 Payout Date,
provided that Year 2 Actual Revenues are equal to or greater than Year 1 Actual
Revenues.
c. Four and one-quarter percent (4.25%) of Year 1 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 3 Payout Date,
provided that Year 3 Actual Revenues are equal to or greater than Year 1 Actual
Revenues.
d. Four and one-quarter percent (4.25%) of Year 1 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 4 Payout Date,
provided that Year 4 Actual Revenues are equal to or greater than Year 1 Actual
Revenues.
e. Four and one-quarter percent (4.25%) of Year 1 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 5 Payout Date,
provided that Year 5 Actual Revenues are equal to or greater than Year 1 Actual
Revenues.
2. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 2 Excess Revenues are greater than zero, then:
a. Four and one-quarter percent (4.25%) of Year 2 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 2 Payout Date.
b. Four and one-quarter percent (4.25%) of Year 2 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 3 Payout Date,
provided that Year 3 Actual Revenues are equal to or greater than Year 2 Actual
Revenues.
c. Four and one-quarter percent (4.25%) of Year 2 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 4 Payout Date,
provided that Year 4 Actual Revenues are equal to or greater than Year 2 Actual
Revenues.
d. Four and one-quarter percent (4.25%) of Year 2 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 5 Payout
<PAGE>
Date, provided that Year 5 Actual Revenues are equal to or greater than Year 2
Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 3 Excess Revenues are greater than zero, then:
a. Four and one-quarter percent (4.25%) of Year 3 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 3 Payout Date.
b. Four and one-quarter percent (4.25%) of Year 3 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 4 Payout Date,
provided that Year 4 Actual Revenues are equal to or greater than Year 3 Actual
Revenues.
c. Four and one-quarter percent (4.25%) of Year 3 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 5 Payout Date,
provided that Year 5 Actual Revenues are equal to or greater than Year 3 Actual
Revenues.
4. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 4 Excess Revenues are greater than zero, then:
a. Four and one-quarter percent (4.25%) of Year 4 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 4 Payout Date.
b. Four and one-quarter percent (4.25%) of Year 4 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 5 Payout Date,
provided that Year 5 Actual Revenues are equal to or greater than Year 4 Actual
Revenues.
5. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 5 Excess Revenues are greater than zero, then:
a. Four and one-quarter percent (4.25%) of Year 5 Excess
Revenues will be paid to STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the aggregate revenues
reported by URSI for a fiscal year that are generated by operations acquired by
URSI by means of the Merger and operations acquired by URSI by means of
<PAGE>
the merger transaction described in that certain Agreement and Plan of
Reorganization by and among URSI, Edward W. Morawski and Northland Fleet Leasing
Company (the "NFLC Merger"), provided that revenues reported by URSI for fiscal
year 1998 will be adjusted to reflect revenues of COMPANY and Northland Fleet
Leasing Company from January 1, 1998 until the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year
1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year
1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year
2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year
2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year
2002.
g. "Year 1 Target Revenues" means $11,175,024.
h. "Year 2 Target Revenues" means the greater of (i) 110% of
Year 1 Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of
Year 2 Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of
Year 3 Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of
Year 4 Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year
1 Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are
equal to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are
zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year
2 Actual Revenues over Year 2 Target Revenues. If Year 2 Target
<PAGE>
Revenues are equal to or greater than Year 2 Actual Revenues, Year 2 Excess
Revenues are zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year
3 Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are
equal to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are
zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year
4 Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are
equal to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are
zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year
5 Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are
equal to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are
zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI
announces its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2000.
t. "Year 4 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues,
including without limitation decisions regarding the allocation and
non-allocation of capital and other resources, decisions regarding business that
will be accepted or rejected, personnel decisions including decisions to lay off
employees, and decisions to shut down or downsize operations, all without making
any offsetting adjustments to Revenues or contingent consideration, provided
only that such decisions are made in a good faith effort to maximize total
return to the shareholders of URSI to the extent that the same can be realized
without undue risk and in compliance with applicable laws.
<PAGE>
8. If the fiscal year of URSI is changed or operations acquired by
URSI by means of the Merger or the NFLC Merger are sold, a reasonable adjustment
will be made to these provisions so that the contingent consideration paid to
STOCKHOLDERS will be approximately the same as it would have been if the fiscal
year had not been changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock
to be paid as contingent consideration, URSI Stock will be valued at Fair Market
Value as of the trading day the day before the contingent consideration is paid.
"Fair Market Value" of the URSI Stock as of a date means the market price per
share of such Shares determined by the Board of Directors of URSI as follows:
(a) if the URSI Stock is traded on a stock exchange on the date in question,
then the Fair Market Value will be equal to the closing price reported by the
applicable composite-transactions report for such date; (b) if the URSI Stock is
traded over-the-counter on the date in question and is classified as a national
market issue, then the Fair Market Value will be equal to the last-transaction
price quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
11. Despite anything to the contrary in this Annex I or elsewhere in
the Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS
as contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or
the number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
<PAGE>
13. The right to be paid contingent consideration is personal and
cannot be assigned by any STOCKHOLDER without the consent of URSI except upon
the death of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon
any STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
Edward W. Morawski 100%
---
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of each
Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,850 50% 50%
Keystone Towing,
Inc. 377,624 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,164,930
<PAGE>
EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
NORTHLAND FLEET LEASING COMPANY
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of Directors
of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 4
2.1 Manner of Conversion 4
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES OF URSI STOCK 4
4. PRE-CLOSING AND CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc. 9
5.8 Spin-off by the COMPANY 9
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 11
5.12 Permits and Intangibles 11
5.13 Environmental Matters 12
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
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5.18 Compensation; Employment Agreements 15
5.19 Employee Plans 15
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 20
5.23 No Violations 24
5.24 Government Contracts 24
5.25 Absence of Changes 24
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 26
5.28 Relations with Governments 26
5.29 Disclosure 26
(B) Representations and Warranties of STOCKHOLDERS 27
5.30 Authority; Ownership 27
5.31 Preemptive Rights 27
5.32 No Intention to Dispose of URSI Stock 27
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 28
6.2 URSI Stock 28
6.3 Validity of Obligations 28
6.4 Authorization 28
6.5 No Conflicts 29
6.6 Capitalization of URSI and Ownership of URSI STOCK 29
6.7 No Side Agreements 30
6.8 Subsidiaries 30
6.9 Business; Real Property; Material Agreements; Financial
Information 30
6.10 Conformity with Law 31
6.11 No Violations 31
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 33
7.3 Prohibited Activities 34
7.4 No Shop 35
7.5 Notice to Bargaining Agents 36
7.6 Termination of Plans 36
7.7 URSI Prohibited Activities 36
7.8 Notification of Certain Matters 37
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7.9 Amendment of Schedules 37
7.10 Cooperation in Preparation of Registration Statement 38
7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY 39
8.1 Representations and Warranties; Performance of Obligations 39
8.2 Satisfaction 39
8.3 No Litigation 40
8.4 Stockholders' Release 40
8.5 Opinion of Counsel 40
8.6 Director Indemnification 40
8.7 Registration Statement 41
8.8 Consents and Approvals 41
8.9 Good Standing Certificates 41
8.10 No Waivers 41
8.11 No Material Adverse Change 41
8.12 Transfer Restrictions 41
8.13 Employment Agreements, Consulting Agreements, Leases
and Cosale Agreement 42
8.14 Tax Opinion 42
8.15 NATI Closing 42
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 42
9.1 Representations and Warranties; Performance of Obligations 42
9.2 No Litigation 42
9.3 Examination of Final Financial Statements 43
9.4 No Material Adverse Effect 43
9.5 STOCKHOLDERS' Release 43
9.6 Satisfaction 43
9.7 Termination of Related Party Agreements 43
9.8 Opinion of Counsel 43
9.9 Consents and Approvals 44
9.10 Good Standing Certificates 44
9.11 Registration Statement 44
9.12 Employment Agreements, Consulting Agreements and Leases 44
9.13 Repayment of Indebtedness 44
9.14 FIRPTA Certificate 45
9.15 Insurance 45
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10. POST-CLOSING COVENANTS 45
10.1 Preservation of Tax and Accounting Treatment 45
10.2 Disclosure 46
10.3 Cooperation in Tax Return Preparation 46
10.4 Tax Return Preparation and Filing 46
10.5 Reorganization Status Information Reporting 47
10.6 Special Definitions Related to Tax Matters 47
10.7 Directors 48
10.8 Release from Guarantees 48
10.9 Preservation of Plans 49
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS 49
11.2 Indemnification by URSI 50
11.3 Third Person Claims 50
11.4 Exclusive Remedy 52
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 54
11.7 Special Contest Rights Related to Tax Matters 57
11.8 Special Notification Requirements Regarding Tax Disputes 57
11.9 Refunds 57
11.10 Optional Payment With Shares 58
12. TERMINATION OF AGREEMENT 58
12.1 Termination 58
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements 59
13. NONCOMPETITION 59
13.1 Prohibited Activities 59
13.2 Damages 60
13.3 Reasonable Restraint 60
13.4 Severability; Reformation 61
13.5 Independent Covenant 61
13.6 Materiality 61
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 62
14.1 STOCKHOLDERS 62
14.2 URSI 62
14.3 Damages 63
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14.4 Survival 63
15. TRANSFER RESTRICTIONS 63
15.1 Transfer Restrictions 63
15.2 Permitted Transferees 64
16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 65
16.2 Accredited Investors; Economic Risk; Sophistication 65
17. REGISTRATION RIGHTS 65
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 66
17.3 Registration Procedures 68
17.4 Underwriting Agreement 68
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 69
18. GENERAL 69
18.1 Cooperation 69
18.2 Successors and Assigns 69
18.3 Entire Agreement 69
18.4 Counterparts 69
18.5 Brokers and Agents 70
18.6 Expenses 70
18.7 Notices 71
18.8 Governing Law; Forum 72
18.9 Survival of Representations and Warranties 72
18.10 Exercise of Rights and Remedies 72
18.11 Time 73
18.12 Reformation and Severability 73
18.13 Remedies Cumulative 73
18.14 Captions 73
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<PAGE>
SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
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<PAGE>
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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<PAGE>
TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
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<PAGE>
Material Documents 5.23
Merger Whereas
multi-employer pension plan 5.20
NATI 5.1
NATI Agreement 11.1
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), NORTHLAND FLEET LEASING COMPANY, a Michigan
corporation (the "COMPANY"), and the stockholders listed on Annex II (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., ASC Transportation Services, Caron Auto Brokers, Inc., Caron
Auto Works, Inc., Falcon Towing and Auto Delivery, Inc., Keystone Towing, Inc.,
Northland Auto Transporters, Inc., Silver State Tow & Recovery, Inc. and
Smith-Christensen Enterprises, Inc. (the "Other Companies") in order to acquire
additional vehicle towing and transport companies (the Other Companies, together
with the COMPANY, are collectively referred to herein as the "Founding
Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have approved
and adopted this Agreement as a reorganization described in Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations
will cause Articles of Merger with respect to the Merger (the "Articles of
Merger") to be signed, verified and delivered to the Secretary of State of the
State of Delaware and, if required, the Articles of Merger or a
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<PAGE>
similar document to be signed, verified and filed with the relevant authorities
in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger, such
Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
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<PAGE>
(i) as of the date of this Agreement, the authorized capital stock of
the COMPANY consists of 60,000 shares of common stock, ("COMPANY Stock"), of
which 1,000 shares are issued and outstanding; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
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2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as treasury
stock or owned by any COMPANY Subsidiary shall be cancelled and retired and no
shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of
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<PAGE>
such certificates, be entitled to receive the number of shares of URSI Stock and
the amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as set forth in Section 2.2,
notwithstanding the number of shares of COMPANY Stock such certificates
represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined below
in Section 4) the certificates representing COMPANY Stock, duly endorsed in
blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of
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URSI Stock, and the delivery of a certified check or checks in an amount equal
to the cash portion of the consideration which the STOCKHOLDERS shall be
entitled to receive pursuant to the Merger, shall occur and be deemed to be
completed. If so requested by any STOCKHOLDER at or prior to the Pre-Closing,
URSI will use its best efforts to cause all cash to be paid to such STOCKHOLDER
on the CLOSING DATE to be paid by the Underwriters (as defined in Section 5.29)
by initiating a wire transfer payment pursuant to instructions included in
STOCKHOLDER's request. After the Pre-Closing and until the Closing Date, no
party may withdraw, terminate or rescind any delivery made at the Pre-Closing
unless this Agreement is terminated as provided in Section 12. All documents
delivered at the Pre-Closing shall be held by Howard Rice for final delivery on
the Closing Date as directed by the parties and their counsel at the
Pre-Closing, provided only that the Articles of Merger and any similar document
may be filed to become effective on the Closing Date. Should the Agreement be
terminated as provided in Section 12 prior to the Closing Date, the parties
shall take all steps necessary to rescind any such filings, Howard Rice shall
return all documents delivered at the Pre-Closing to the parties who delivered
the same, all such deliveries at the Pre-Closing will be rescinded and a
nullity, the Merger shall not become effective, the shares of COMPANY Stock will
not be converted into URSI Stock, and shares of URSI Stock will not be delivered
to STOCKHOLDERS. The documents delivered at Pre-Closing shall include documents
required to rescind, prior to the Closing Date, any filing of the Articles of
Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The COMPANY
and each of the STOCKHOLDERS jointly and severally represent and warrant that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.9 hereof, shall be
true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
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until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and Northland Auto Transporters, Inc., a Michigan corporation
("NATI"), and the COMPANY's and NATI's Subsidiaries, taken as a whole (a
"Material Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in
which the COMPANY is authorized or qualified to do business. True, complete and
correct copies of the Certificate of Incorporation and Bylaws, each as amended,
of the COMPANY and each of the COMPANY's Subsidiaries (collectively, the
"Charter Documents"), certified by the Secretary or Assistant Secretary of the
COMPANY, are all attached hereto as Schedule 5.1. A true, complete and correct
copy of each Certificate of Incorporation included in the Charter Documents,
certified by the Secretary of State or other appropriate authority of the state
of incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further,
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except as set forth on Schedule 5.3, are owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the issued and outstanding shares of the
capital stock of the COMPANY have been duly authorized and validly issued, are
fully paid and nonassessable, are owned of record and beneficially by the
STOCKHOLDERS and further, such shares were offered, issued, sold and delivered
by the COMPANY in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
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5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of either the COMPANY
or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY ("Affiliates") other
than in the ordinary course of business, within the preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the combined Balance Sheet of the COMPANY and NATI as of December 31,
1997 and 1996 and the related combined Statements of Operations, Cash Flows and
Retained Earnings for each of the years in the three-year period ended December
31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet
Date"). Such Financial Statements have been prepared in accordance with KPMG
Peat Marwick LLP's interpretation of generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as
noted). Except as set forth on Schedule 5.9, such Balance Sheets as of December
31, 1997 and 1996 present fairly the combined financial position of the COMPANY
and NATI (and each of the COMPANY's Subsidiaries on a consolidated basis) as of
the dates indicated thereon, and such Statements of Operations, Cash Flows and
Retained Earnings present fairly the results of their combined operations for
the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance sheet
of the Company at the Balance Sheet Date exceeding $10,000 which either (x)
should have properly been accrued on the balance sheet of the Company as of the
Balance Sheet Date in accordance with generally accepted accounting principles
consistently applied, or (y) are liabilities of the nature
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described in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items
subject to any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such balance
sheet were being prepared immediately prior to Closing or if such liabilities
represent liabilities of the nature described in Section 5.13, Section 5.20
and/or Section 5.22 (excluding items subject to any knowledge qualifications
contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement or
amendment pursuant to Section 7.9, all liabilities which were incurred after the
cutoff date for Schedule 5.10 or any supplement or amendment thereto, and were
incurred other than in the ordinary course of business or exceed $100,000 and
are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
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(c) name of claimant and all other parties to the claim, suit or
proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the amount shown on Schedule 5.11, net of
reserves reflected in the balance sheet as of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
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5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or Hazardous Substances and have reported, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY or any of the COMPANY's Subsidiaries where Solid Wastes,
Hazardous Wastes or Hazardous Substances have been treated, stored, used,
disposed of or otherwise handled; (iii) there have been no releases (as defined
in Environmental Laws) at, from, under, in or on any property owned or operated
by the COMPANY or any of the COMPANY's Subsidiaries except as permitted by
Environmental Laws; (iv) to the knowledge of the COMPANY there is no on-site or
off-site location to which the COMPANY or any of the COMPANY's Subsidiaries has
transported or disposed of Solid Wastes, Hazardous Wastes or Hazardous
Substances or arranged for the transportation of Solid Wastes, Hazardous Wastes
or Hazardous Substances, which site is the subject of any federal, state, local
or foreign enforcement action or any other investigation which could lead to any
claim against the COMPANY, any of the COMPANY's Subsidiaries or URSI for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) to the
knowledge of the COMPANY the COMPANY has no contingent liability in connection
with any release of any Solid Waste, Hazardous Waste or Hazardous Substance into
the environment. Schedule 5.13 lists all releases of Hazardous Wastes or
Hazardous Substances by the COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date
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and (ii) acquired since the Balance Sheet Date, and (z) all leases for real and
personal property to which the COMPANY or any of its subsidiaries is a party
involving real or personal property having a value in excess of $2,500,
including in the case of (z) true, complete and correct copies of all such
leases and including in cases (x), (y) and (z) an indication as to which real
and personal property is currently owned, or was formerly owned, by STOCKHOLDERS
or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as
shown on Schedule 5.14, all of the trucks and other material machinery and
equipment of the COMPANY and the COMPANY's Subsidiaries listed on Schedule 5.14
are in good working order and condition, ordinary wear and tear excepted. All
leases set forth on Schedule 5.14 are in full force and effect and constitute
valid and binding agreements on the COMPANY (or a COMPANY Subsidiary, as
applicable), and to the knowledge of the COMPANY, constitute valid and binding
agreements on the other parties thereto (and their successors) thereto in
accordance with their respective terms. All fixed assets used by the COMPANY and
the COMPANY's Subsidiaries that are material to the operation of their
respective businesses are either owned by the COMPANY or the COMPANY's
Subsidiaries or leased under an agreement indicated on Schedule 5.14. Schedule
5.14 shall, without limitation, contain true, complete and correct copies of all
title reports and title insurance policies received or owned by the COMPANY or
the COMPANY's Subsidiaries. The COMPANY has also provided in Schedule 5.14 a
summary description of all plans or projects which have been memorialized in any
written or electronic document or file and involves the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business, with respect to which the COMPANY (or any of the
COMPANY's Subsidiaries) has made any expenditure in the two-year period prior to
the date of the Agreement in excess of $10,000, or which if pursued by the
COMPANY (or such Subsidiary) would require additional expenditures of capital in
excess of $10,000. Except as set forth on Schedule 5.14 and except for liens
excepted in Section 7.3(vi)(1) and (3), there are no liens against the COMPANY's
properties.
5.15 Significant Customers; Material Contracts and Commitments. The COMPANY
has delivered to URSI an accurate list (Schedule 5.15) of (i) all significant
customers (i.e., those customers representing five percent (5%) or more of the
COMPANY's revenues for the 12 months ended on the Balance Sheet Date, or who
have paid to the COMPANY $100,000 or more over any four consecutive fiscal
quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective
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properties are bound (including, but not limited to, contracts with significant
customers, joint venture or partnership agreements, contracts with any labor
organizations, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, leases, liens, pledges or other security
agreements) (a) as of the Balance Sheet Date and (b) entered into since the
Balance Sheet Date, and in each case has delivered true, complete and correct
copies of such agreements to URSI, except that leases set forth on Schedule 5.14
need not be set forth on Schedule 5.15. Except to the extent set forth on
Schedule 5.15, (i) none of the COMPANY's (including the COMPANY's Subsidiaries)
significant customers has cancelled or substantially reduced or, to the
knowledge of the COMPANY, is currently attempting or threatening to cancel any
Material Contract or substantially reduce utilization of the services provided
by the COMPANY (including the COMPANY's Subsidiaries), and (ii) the COMPANY and
the COMPANY's Subsidiaries have complied with all material commitments and
obligations pertaining to any Material Contract, and are not in default under
any such Material Contract, and no notice of default has been received, and no
Stockholder or any affiliate of any Stockholder is a party to any such Material
Contract. Except as set forth in Schedule 5.15, the COMPANY and the COMPANY's
Subsidiaries have not been the subject of any election in respect of union
representation of employees and are not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union. Except as set forth on Schedule 5.15, no employees of the
COMPANY or its Subsidiaries are represented by any labor union or covered by any
collective bargaining agreement and no campaign to establish such representation
has ever occurred or is in progress. There is no pending or, to the COMPANY's
knowledge, threatened labor dispute involving the COMPANY (including the
COMPANY's Subsidiaries) and any group of its employees, nor has the COMPANY
(including the COMPANY's Subsidiaries) experienced any labor interruptions over
the past three years, and the COMPANY considers its relationship with employees
to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been
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cancelled by the insurance company, and the COMPANY (including such COMPANY's
Subsidiaries) has never submitted a written application for insurance and been
denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to URSI
an accurate schedule (Schedule 5.18) showing all officers, directors and key
managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
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(iii) Sample benefit distribution forms that pertain to all Plans that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect to
the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment
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period permitting retroactive amendment of such Qualified Plans has not expired
and will not expire within one hundred twenty (120) days after the Closing Date.
All reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, annual reports, summary annual reports, actuarial reports, PBGC-1
Forms, audits or tax returns) have been timely filed or distributed. None of:
(i) the STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
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assumptions contained in the Regulations of the PBGC governing the funding
of terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
(vi) The COMPANY (including any of the COMPANY's
Subsidiaries) is not now nor has it been within the past five years a member of
a "controlled group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the COMPANY's knowledge, there is
no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has not
incurred liability under Section 4062 of ERISA;
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(x) Each Qualified Plan that is listed as terminated on Schedule 5.19
was terminated in compliance with all applicable requirements of ERISA and the
Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has
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been received. The COMPANY (including all of the COMPANY's Subsidiaries) has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations
and is not in violation of any of the foregoing which would have a Material
Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect to
the COMPANY and any affiliated, combined, consolidated, unitary or similar group
of which the COMPANY is or was a member (a "Relevant Group") with any Taxing
Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its Subsidiaries
(as opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in the COMPANY Financial Statements are
sufficient for, and adequate to cover, all unpaid Taxes of such Acquired Party.
(iii) No Acquired Party is a party to any current agreement extending
the time within which to file any Tax Return. No claim has ever been made by any
Taxing Authority in a jurisdiction in which an Acquired Party does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
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Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the meaning of Section
168 of the Code. No Acquired Party is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986, or to any "long-term contract"
within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
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(xiii) Each Acquired Party has substantial authority for the treatment
of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of the Code)
on its federal income Tax Returns, all positions taken on its relevant federal
income Tax Returns that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any Acquired
Party pursuant to Section 341(f) of the Code, nor has the Company or any
Acquired Party made any tax election that would materially increase the amount
of Taxes payable by the Company or any Acquired Party in any Post-Closing
Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of the transaction. Moreover, shares of
COMPANY Stock and shares of URSI Stock held by STOCKHOLDERS and otherwise sold,
redeemed, or disposed of on or after January 1, 1997, including after the
Closing Date, will be considered in making this representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
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(xx) The fair market value of the assets of the COMPANY transferred to
URSI exceeds the sum of its liabilities, plus the amount of liabilities, if any,
to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY will be separate consideration for, or allocable to, any of their
shares of the COMPANY; none of the shares of URSI Stock received by any
STOCKHOLDER-employees in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
STOCKHOLDER-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(xxiv) The fair market value of the URSI Stock and other consideration
to be received by each STOCKHOLDER pursuant to the Merger, will be approximately
equal to the fair market value of the COMPANY Stock surrendered in the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not exceed 7.5% of
the aggregate consideration to be received by such STOCKHOLDERS pursuant to the
Merger.
(xxvi) Intentionally Omitted.
(xxvii) The COMPANY made an election to be classified as an S
Corporation for its taxable year beginning on January 1, 1992 under Section
1362(a) of the Code and corresponding provisions of the laws of the state in
which it is subject to tax, and has qualified as an S Corporation at all times
since such date. The Company does not own any subsidiary which is a qualified
Subchapter S subsidiary within the meaning of Section 1361(b)(3) of the Code.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
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5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities outstanding,
or ownership interests or any grant of any options, warrants, calls, conversion
rights or commitments;
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
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ordinary and customary bonuses and salary increases for employees (other
than the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire any property, rights or assets outside of the ordinary
course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
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(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or
associated with the COMPANY for any failure of the Registration Statement to
become effective, or of the IPO to occur at a particular price or within a
particular range of prices or to occur at all; and (iii) the decision of
STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent to
the proposed Merger, has been made independent of, and without reliance upon,
any statements, opinions or
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other communications of, or due diligence investigations which have been or will
be made or performed by any prospective Underwriter, relative to URSI or the
prospective IPO. The Underwriters shall have no obligation to the STOCKHOLDERS
with respect to any disclosure contained in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY stock identified on Annex II as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.30
hereof, such COMPANY Stock is owned free and clear of all liens, encumbrances
and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or
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state securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
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6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly issued, fully paid and nonassessable. All of the shares of
URSI Stock issued to persons set forth on Annex III and, based on the
representations of STOCKHOLDERS contained in this Agreement and in the documents
delivered to URSI pursuant hereto, to STOCKHOLDERS pursuant to this
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Agreement, were or will be offered, issued, sold and delivered by URSI in
compliance with all applicable state and federal laws concerning the issuance of
securities and none of such shares were or will be issued in violation of the
preemptive rights of any past or present stockholder. On the Closing Date the
capitalization of URSI will be as set forth in the Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any of
the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or contingent, other than those incurred in connection with
this Agreement, the Other Agreements and the contemplated IPO of URSI Stock.
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6.10 Conformity with Law. URSI is not in violation of any law or regulation
or any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. URSI (including URSI's Subsidiaries)
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a URSI Material Adverse Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
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(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of any
of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY after the Merger will be separate consideration for, or allocable
to, any of their shares of the COMPANY; none of the shares of URSI Stock
received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane to
the business of URSI.
7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as
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URSI or the Founding Companies other than the COMPANY may from time to time
reasonably request. The COMPANY will cooperate with URSI and the Founding
Companies other than the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. URSI, the
STOCKHOLDERS and the COMPANY will treat all information obtained in connection
with the negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Founding Companies other than the
COMPANY as confidential in accordance with the provisions of Section 14 hereof.
In addition, URSI will cause each of the Founding Companies other than the
COMPANY to enter into a provision similar to this Section 7.1 requiring each
such Founding Company to keep confidential any information obtained by such
Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this Agreement
and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
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(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease instruments
and not enter into new or amended debt or lease instruments over $2,500, without
the knowledge and consent of URSI (which consent shall not be unreasonably
withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between the
date of this Agreement and the Closing Date, the COMPANY has not and, without
the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in connection
with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees
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(other than to STOCKHOLDERS and their affiliates), provided that neither the
salary nor the commission payable to any employee may increase to a level higher
than one hundred ten percent (110%) of such employee's current salary or bonus,
whichever is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice, provided, further,
that such adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely affect
the Tax liability of the Company or any Acquired Party (or URSI following the
Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the
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termination of this Agreement in accordance with its terms, directly or
indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
(iii) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures that would be material to URSI
and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
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assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY shall
give prompt notice to URSI of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-Closing, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. In the event that the COMPANY amends or supplements
a Schedule pursuant to this Section 7.9, and URSI and a majority of the Founding
Companies do not consent to the effectiveness of such amendment or supplement at
or before the Pre-Closing, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. In the event that URSI amends or
supplements a Schedule pursuant to this Section 7.9 and COMPANY and a majority
of the
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Founding Companies do not consent to the effectiveness of such amendment or
supplement at or before the Pre-Closing, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.9. In the event that one of the other
Founding Companies amends or supplements a Schedule pursuant to Section 7.9 of
one of the Other Agreements, URSI shall give the COMPANY notice promptly after
it has knowledge thereof. If URSI, COMPANY and a majority of the Founding
Companies do not consent to the effectiveness of such amendment or supplement at
or before the Pre-Closing, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. For purposes of this Section
7.9, URSI shall be deemed to have given its consent to the effectiveness of any
amendment or supplement to a Schedule if URSI does not notify COMPANY of its
disapproval within 48 hours after URSI is notified of such amendment or
supplement, and COMPANY and each other Founding Company shall be deemed to have
given its consent to the effectiveness of any amendment or supplement to a
Schedule if COMPANY or such other Founding Company, as applicable, does not
notify URSI of its disapproval within 48 hours after COMPANY or such other
Founding Company, as applicable, is notified of such amendment or supplement.
Except as otherwise provided herein, no amendment of or supplement to a Schedule
shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that combined
financial statements of the COMPANY and NATI for any quarter subsequent to
December 31, 1997 are required to be included in the Registration Statement, the
COMPANY shall provide, and URSI shall have had sufficient time to review, the
unaudited combined balance sheet and
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statements of income, cash flows and retained earnings of the COMPANY and NATI
as of the end of such quarter, disclosing no Material Adverse Change in the
combined financial condition or results of operations of the COMPANY and NATI.
Such financial statements, which shall be deemed to be Financial Statements (as
described in Section 5.9), shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). To the extent such Financial
Statements shall be included or reflected in the Registration Statement, any
events or circumstances reflected therein which might constitute a Material
Adverse Effect with respect to the COMPANY and NATI shall be deemed to have been
waived by URSI and URSI shall have no rights in respect of such Material Adverse
Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed
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satisfied if (i) URSI shall have made available to the COMPANY copies of each
draft (or changed pages of such draft) of the Registration Statement produced
prior to the initial filing with the Securities and Exchange Commission (the
"SEC") the effectiveness thereof and the filing with the SEC of any amendment or
supplement thereto after the effectiveness thereof (including any prospectus
filed pursuant to Rule 424 under the 1933 Act) and (ii) the COMPANY or
STOCKHOLDERS shall have failed to inform URSI in writing prior to the filing or
the effectiveness thereof, as the case may be, of the existence of an untrue
statement of a material fact or the omission of such a statement of a material
fact, provided however, that for the period commencing 72 hours prior to any
such filing or effectiveness, URSI can make such draft or changed pages
available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
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8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under any
Other Agreement, unless such condition does not constitute a Material Adverse
Effect (as defined in such Other Agreement) on the Founding Company party to
such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
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8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated the
Closing Date of Fabian & Clendenin to the effect that the Merger qualifies as a
reorganization as defined in Section 368(a)(i)(A) of the Code. The STOCKHOLDERS
shall provide such certificates as may be reasonably required by such firm in
rendering such opinion.
8.15 NATI Closing. NATI shall be acquired by URSI on the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of URSI as a result of
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which the management of URSI deems it inadvisable to proceed with the
transactions hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated
combined balance sheets of the COMPANY and NATI for the fiscal quarters
beginning after the Balance Sheet Date, and the unaudited consolidated combined
statement of income, cash flows and retained earnings of the COMPANY and NATI
for the fiscal quarters beginning after the Balance Sheet Date, disclosing no
material adverse change in the combined financial condition of the COMPANY and
NATI or the results of their operations from the financial statements as of the
Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Mathieson,
Parr, Schuler, Edward & Jolly, LLP, counsel to the COMPANY and the STOCKHOLDERS,
dated the Pricing Date, in the form annexed hereto as Annex VI, and the
Underwriters shall have received a copy of the same opinion addressed to them.
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9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the COMPANY
shall have obtained and delivered to URSI such additional consents to the Merger
as URSI may reasonably request including, without limitation, URSI's receipt on
or prior to the Pricing Date of those licenses, franchises, permits or
governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the STOCKHOLDERS
shall have repaid the COMPANY (including the Company's
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Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing
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Date, the disposition by the STOCKHOLDERS of a material amount of URSI Stock
issued in connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing the
preparation and filing of) all income Tax Returns with respect to URSI or any
Acquired Party for any taxable period beginning on or after the Closing Date.
The parties hereto acknowledge that the Closing Date shall be the last day of a
taxable period of the Company pursuant to Code Section 381 and the regulations
promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect
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to the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to period and (b) prepare
such Tax Returns in a manner consistent with prior years, in each case as
determined in the good faith judgment of the preparer of such returns; provided,
however, that in all events such Tax Returns shall be prepared in a manner
consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
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(b) "Interim Period" shall mean any taxable period commencing
prior to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period that
begins before the Closing Date and ends on or before the Closing Date and (ii)
the portion of any Interim Period through and including the Closing Date.
(d) "Post-Closing Period" means any taxable period that begins
after the Closing Date, and, with respect to any Interim Period, the portion of
such Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income,
gross receipts, ad valorem, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A), customs duties, capital stock, net worth, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, workers compensation, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government,
including any interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations,
claims for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, having or purporting to have jurisdiction with respect to
any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such guarantees on indebtedness
being assumed by URSI. URSI agrees to indemnify the STOCKHOLDERS against any and
all claims made by lenders
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under such guarantee which arise as a result of URSI's failure to cause such
guarantee to be released on or prior to the Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify under Section 401(a) of the Code and makes contributions to such plan
at or above the level stated in Schedule 10.9, or (ii) in the case of each other
Plan, URSI establishes a replacement Plan providing equivalent or better
benefits, provided that if the cost of providing equivalent benefits should, in
the good faith judgment of URSI, become commercially unreasonable, the
replacement plan established by URSI may have benefits that are, in the good
faith judgment of URSI, as close to equivalent as can be obtained at
commercially reasonable cost. There are no intended third party beneficiaries of
this Section 10.9, and after the Closing Date it can be waived or modified by
URSI and STOCKHOLDERS (or their successors) shown as owning two-thirds of
COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally (except with respect to Sections 5.30
through 5.32, which shall be several), will indemnify, defend, protect and hold
harmless URSI, the COMPANY and the Surviving Corporation at all times from and
after the date of this Agreement until the Expiration Date as defined in Section
5 above, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by URSI, the COMPANY or the Surviving Corporation as a
result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the schedules or
certificates delivered in connection herewith (other than the representations
and warranties provided in Section 5.22, for which Section 11.6 provides special
indemnity provisions); (ii) any nonfulfillment of any agreement on the part of
the STOCKHOLDERS or the COMPANY under this Agreement; or (iii) any liability
under the 1933 Act, the 1934 Act or other Federal or state law or regulation, at
common law or otherwise, (x) arising out of or based upon any untrue statement
of a material
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fact relating to the COMPANY (including the COMPANY's Subsidiaries) or the
STOCKHOLDERS that is provided to URSI or its counsel by the COMPANY or the
STOCKHOLDERS and contained in any preliminary prospectus relating to the IPO,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or (y) arising out of or based upon any
omission to state therein a material fact relating to the COMPANY (including the
COMPANY's Subsidiaries) or the STOCKHOLDERS that is required to be stated
therein or necessary to make the statements therein not misleading, and not
provided to URSI or its counsel by the COMPANY or the STOCKHOLDERS, provided,
however, that such indemnity shall not inure to the benefit of URSI, the COMPANY
or the Surviving Corporation to the extent that such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in
writing, corrected information to URSI counsel and to URSI for inclusion in the
final prospectus, and such information was not so included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim
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by a person not a party to this Agreement ("Third Person"), or the commencement
of any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if such
counsel shall have a conflict of interest that prevents such counsel from
representing Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing and Indemnifying
Party will reimburse the Indemnified Party for the expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim and all additional costs
of settlement or judgment. If the Indemnifying Party does not undertake to
defend such matter as to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense
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through counsel of its choice, at the cost and expense of the Indemnifying
Party, and the Indemnified Party may settle such matter, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. All settlements hereunder shall effect a complete release
of the Indemnified Party, unless the Indemnified Party otherwise agrees in
writing. The parties hereto will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Section, provided that no Indemnifying
Party shall be obligated to seek any payment pursuant to the terms of any
insurance policy. All indemnification payments under this Section shall be
deemed adjustments to the Merger consideration provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement plus the aggregate value of the consideration paid to the
stockholders of NATI pursuant to Section 2.2 of the Agreement and Plan of
Reorganization among URSI, NATI and the stockholders of NATI ("NATI Agreement")
unless this Agreement is terminated prior to the Closing Date, in which event
the Indemnification Threshold is an amount equal to two percent (2%) of the
Minimum Value set forth in Annex I. All such amounts otherwise payable by one or
more STOCKHOLDERS in excess of the amount so offset and reduced shall be paid
without offset or reduction pursuant to this Section 11.5(i). This Section
11.5(i) shall not apply to amounts payable pursuant to Section 11.6. For
purposes of determining the Indemnification Threshold, the
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URSI Stock shall be valued at the initial price of the URSI Stock sold to the
public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to Sections
11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and reduced (but
not below zero) by an amount equal to the Indemnification Threshold. All such
amounts otherwise payable by URSI in excess of the amount so offset and reduced
shall be paid without offset or reduction pursuant to this Section 11.5(ii).
This Section 11.5(ii) shall not apply to amounts payable pursuant to Section
11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in no
event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no event shall any STOCKHOLDER be
liable under this Agreement, including this Section 11, and the NATI Agreement
to pay more than one-half the amount of the proceeds received by such
STOCKHOLDER pursuant to this Agreement and the NATI Agreement, calculated as
provided in Section 11.5(iv), with respect to Specially Limited Claims and
"Specially Limited Claims" as such term is defined in the NATI Agreement.
Specially Limited Claims are all claims that may be made pursuant to this
Agreement, including this Section 11, except claims based on (a) breach of
representations and warranties in Section 5.13, (b) breach of representations
and warranties in Section 5.19 or Section 5.20 or (c) Section 11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, and the
NATI Agreement for amounts which in the aggregate exceed the amount of proceeds
received by such STOCKHOLDER pursuant to this Agreement and the NATI Agreement.
The amount of proceeds received by each STOCKHOLDER pursuant to this Agreement
shall be calculated (for purposes of Section 11.5(iii) and this Section
11.5(iv)) by adding (a) the cash proceeds paid to such STOCKHOLDER pursuant to
Section 2.2 hereof prior to the date that the indemnity obligation of such
STOCKHOLDER is paid, plus (b) the net proceeds to such
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STOCKHOLDER from the sale of such STOCKHOLDER's URSI Stock received pursuant to
Section 2.2 hereof prior to the date that the indemnity obligation of such
STOCKHOLDER is paid, plus (c) the Fair Market Value (as defined in Annex I) of
the unsold shares of URSI Stock received by such STOCKHOLDER pursuant to Section
2.2 prior to the date that the indemnity obligation of such STOCKHOLDER is paid,
valued on the trading day prior to the day the indemnification obligation is
paid. The amount of proceeds received by a STOCKHOLDER under the NATI agreement
shall be determined as set forth in Section 11.5(iv) thereof.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first been
provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and
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all Taxes (including without limitation any obligation to contribute to the
payment of, or be entitled to share in the refund of, a Tax determined on a
consolidated, combined or unitary basis with respect to a group of corporations
that includes or included the COMPANY or any Acquired Party) which are (i)
imposed on any member (other than the COMPANY or any Acquired Party) of the
consolidated, unitary or combined group which includes or included the COMPANY
or any Acquired Party or (ii) imposed on the COMPANY or any Acquired Party in
respect of its income, business, property or operations or for which the COMPANY
or any Acquired Party may otherwise be liable (A) for any Pre-Closing Period,
(B) resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to any items of income or gain of an
entity treated as a partnership reported by the COMPANY or any Acquired Party as
a partner, to the extent such items are properly attributable to periods of the
"partnership" ending on or before the Closing Date, or (G) attributable to any
discharge of indebtedness that may result from any capital contributions by
STOCKHOLDERS (or an affiliate of STOCKHOLDERS) to the COMPANY or any Acquired
Party of any intercompany indebtedness owed by COMPANY to any STOCKHOLDER (or an
affiliate of any STOCKHOLDER), but, in each case, only to the extent such Taxes
or the entitlement to such refund are not reflected on the applicable Company
Financial Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly and
severally, indemnify and save URSI, the COMPANY and any Acquired Party harmless
from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party (or any
affiliate of URSI, the COMPANY or any Acquired Party) attributable to any breach
of a warranty or representation made by STOCKHOLDERS in Section 5.22(xx),
Section 5.22(xxiv) or Section 5.22(xxv) and (y) any liability imposed on URSI,
the COMPANY and any Acquired Party (or any affiliate of such companies)
attributable to any breach of a warranty or representation made by STOCKHOLDERS
in Section 5.22, excluding Section 5.22(xx), Section 5.22(xxiv) and Section
5.22(xxv).
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(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party with respect to any
Post-Closing Period and (y) any liability imposed on STOCKHOLDERS attributable
to any breach of a warranty or representation made by URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
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11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and the
COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
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11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY, on
the one hand, or by URSI, on the other hand, if the Pre-Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY, on
the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
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obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of URSI (including the subsidiaries thereof) in a managerial
capacity for the purpose or with the intent of enticing such employee away from
or out of the employ of URSI (including the subsidiaries thereof), provided that
any STOCKHOLDER shall be permitted to call upon and hire any member of his or
her immediate family;
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of URSI (including
the subsidiaries thereof) within the Territory for the purpose of soliciting or
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selling products or services in direct competition with URSI within the
Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an investment not more than three
percent (3%) of the capital stock of any business whose stock is traded on a
national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER who has entered into an Employment Agreement shall thereafter cease
to be employed thereunder, and such STOCKHOLDER shall enter into a business or
pursue other activities not in competition with URSI and/or any subsidiary
thereof, or similar activities or business in locations the
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operation of which, under such circumstances, does not violate clause (i) of
this Section 13, and in any event such new business, activities or location are
not in violation of this Section 13 or of such STOCKHOLDER's obligations under
this Section 13, if any, such STOCKHOLDER shall not be chargeable with a
violation of this Section 13 if URSI and/or any subsidiary thereof shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any STOCKHOLDER against
URSI (including the subsidiaries thereof), whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by URSI of such
covenants. It is specifically agreed that the period of five (5) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each STOCKHOLDER made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such STOCKHOLDER is in
violation of any provision of this Section 13. The covenants contained in this
Section 13 shall not be affected by any breach of any other provision hereof by
any party hereto, except that upon URSI's admission in writing, or a final
judicial determination which is not the subject of appeal or further appeal by
URSI, that URSI has materially breached a STOCKHOLDER's Employment Agreement (if
applicable), right to have URSI Stock registered under the 1933 Act pursuant to
Section 17.1 or 17.2, or right to receive contingent consideration as provided
in section C of Annex I, and URSI's failure to cure such material breach within
30 days of such admission or final judicial determination, whichever is
applicable, then the covenants contained in this Section 13 with respect to such
STOCKHOLDER will expire. The covenants contained in this Section 13 shall have
no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under color of law, provided that prior
to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS
shall, if possible, give prior written notice thereof to URSI and provide URSI
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this section,
URSI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting URSI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii),
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URSI shall, if possible, give prior written notice thereof to the COMPANY and
the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. Upon termination of this Agreement prior
to the Closing Date for any reason other than the material breach or default of
any STOCKHOLDER or COMPANY, URSI will return to COMPANY all documents containing
confidential information of COMPANY that were provided to URSI by COMPANY or
STOCKHOLDERS and all summaries, abstractions, projections, pro formas or like
material prepared by URSI incorporating such confidential information. In the
event of a breach or threatened breach by URSI of the provisions of this
section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction
restraining URSI from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the COMPANY and
the STOCKHOLDERS from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in
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put, call, short-sale, straddle or similar market transactions). The
certificates evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to
Section 3 of this Agreement will bear a legend substantially in the form set
forth below and containing such other information as URSI may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE
EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION
PRIOR TO [insert the first anniversary of the Closing Date]. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section 15.1,
a STOCKHOLDER shall have the right to transfer some or all of the shares of URSI
stock to any one or more of the following, provided that the transferee agrees
to be bound (in a form satisfactory to URSI and its counsel) by the terms and
conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which a majority of the interests therein by
value is owned by the STOCKHOLDER and members of the STOCKHOLDER's family, and
(y) which is and continues to be controlled by the STOCKHOLDER and members of
the STOCKHOLDER'S family for the period set forth in Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no
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present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933 ACT
AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing Date,
whenever URSI proposes to register any URSI Stock for its own or others' account
under the 1933 Act for a public offering, other than (i) registrations of shares
to be used as consideration for acquisitions of additional businesses by URSI
and (ii) registrations relating to employee benefit plans, URSI shall give each
of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the
written request of any of the
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STOCKHOLDERS given within thirty (30) days after receipt of such notice, URSI
shall cause to be included in such registration all of the URSI Stock issued
pursuant to this Agreement which any such STOCKHOLDER requests, provided that
URSI shall have the right to reduce the number of shares included in such
registration to the extent that inclusion of such shares could, in the opinion
of tax counsel to URSI or its independent auditors, jeopardize the status of the
transactions contemplated hereby and by the Registration Statement as a
reorganization described in Section 368(a)(1)(A) of the Code. In addition, if
URSI is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 17.1 that the number of shares to be
sold by persons other than URSI is greater than the number of such shares which
can be offered without adversely affecting the offering, URSI may reduce the
number of shares offered for the accounts of such persons to a number deemed
satisfactory by such managing underwriter, provided that such reduction shall be
made first by reducing the number of shares to be sold by persons other than
URSI, the stockholders named on Annex III hereto, the stockholders of the
Founding Companies, and any person or persons who have required such
registration pursuant to "demand" registration rights granted by URSI;
thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of URSI Stock owned by such stockholder
immediately after the Closing, provided that if any stockholder does not wish to
sell all shares such stockholder is permitted to sell, the opportunity to sell
additional shares shall be reallocated in the same manner to those stockholders
named in Annex III hereto and stockholders of the Founding Companies who wish to
sell more shares until no more shares can be sold by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years after
the Closing Date, the holders of shares of URSI Stock issued to the Founding
Stockholders pursuant to this Agreement and the Other Agreements which have (i)
not been previously registered or sold, (ii) which are not entitled to be sold
under Rule 144(k) (or any similar or successor provision) and (iii) which have
an aggregate market value in excess of $5 million (based on the average closing
price on the five days prior to the date of such request) promulgated under the
1933 Act may request in writing that URSI file a registration statement under
the 1933 Act covering the registration of the shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements
disclosed in the Registration Statement
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then held by such Founding Stockholders (a "Demand Registration"). Within ten
(10) days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to indemnify
URSI pursuant to Section 11 herein, and the amount of the indemnification
obligation exceeds the amount of cash such STOCKHOLDER received from URSI on the
date of the IPO plus the net proceeds received by such STOCKHOLDER from sales of
URSI Stock received pursuant to Section 2.2 hereof prior to the time such claim
is paid, such STOCKHOLDER may request in writing that URSI file a registration
statement under the 1933 Act requesting such number of such STOCKHOLDER's shares
of URSI Stock as is required to be sold to pay the difference between the cash
proceeds and the amount of the indemnification obligation, plus legal and other
expenses, including expenses of the offering, provided arrangements are made to
URSI's reasonable satisfaction that the proceeds will be used solely for the
purpose of such indemnification and the payment of related expenses and that
arrangements are made to the reasonable satisfaction of URSI that the proceeds
of such sale will be used solely for the purpose of such indemnification and the
payment of related expenses, and that no such request may be made until
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after one hundred eighty (180) days following the Closing Date without the
consent of the managing underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
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17.7 Survival. The provisions of this Section 17 shall survive the
Pre-Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i) attempt
in good faith (without being required to incur unreasonable expense) to cause
all conditions to actions to be taken on the Pricing Date and the Closing Date
to be satisfied, and (ii) deliver or cause to be delivered to the other on the
Pricing Date and Closing Date, and at such other times and places as shall be
reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be modified or amended only by a written instrument
executed by the STOCKHOLDERS, the COMPANY and URSI, acting through their
respective officers, duly authorized by their respective Boards of Directors.
Any disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall be
consummated, (i) URSI will pay the fees, expenses and disbursements of URSI and
its agents, representatives, accountants and counsel incurred in connection with
the subject matter of this Agreement and any amendments thereto, including all
costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the STOCKHOLDERS and incurred
prior to the Pricing Date may be paid from COMPANY funds rather than from
personal funds of the STOCKHOLDERS, provided that the STOCKHOLDERS provide to
URSI, prior to the Pricing Date, a detailed statement setting forth the type and
amount of all such fees, expenses or disbursements so paid, and, provided
further, that the aggregate amount of same shall be deducted, on a
dollar-for-dollar basis, from the amount of cash into which the COMPANY Stock
shall be converted pursuant to Section 2.2 hereof. Notwithstanding the foregoing
provisions of Section 18.6, URSI shall further pay or reimburse reasonable costs
of counsel or co-counsel for the Company if and to the extent so mutually agreed
in advance between URSI and such counsel, in circumstances where URSI believes
it obtained or may have obtained a material benefit, in light of market
conditions and other factors, by reason of such counsel or co-counsel
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expediting the transaction which is the subject of this Agreement and reducing
the time required to complete this Agreement and the Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
Northland Fleet Leasing Company
31299 Mally Drive
Madison Heights, MI 48071
Attn: Edward W. Morawski
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and marked "Personal and Confidential" with copies to:
John Stevens, Esq.
Mathieson, Parr, Schuler, Edward & Jolly, LLP
2555 Crooks
Troy, MI 48084
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the
Michigan state court of general jurisdiction in Oakland County, Michigan (or, if
there is federal jurisdiction, then the exclusive jurisdiction and venue of the
United States District Court having jurisdiction over Oakland County). The
parties hereby consent to the personal and exclusive jurisdiction and venue of
said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power, or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
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single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
_______________________________ By __________________________
Name:
Title:
WITNESS: STOCKHOLDERS:
_______________________________ _____________________________
Edward W. Morawski
WITNESS: NORTHLAND FLEET LEASING
COMPANY
_______________________________ By __________________________
Name:
Title:
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ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
NORTHLAND FLEET LEASING COMPANY
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $1,246,099 in cash.
2. 103,842 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $2,492,198.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate
the Merger if the aggregate value of cash and URSI Stock (valued at the IPO
initial public offering price) is less than the Minimum Value of $2,336,435.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
Edward W. Morawski 103,842 $1,246,099
------- ----------
TOTALS: 103,842 $1,246,099
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
<PAGE>
1. If STOCKHOLDERS have the right to be paid contingent consideration
and Year 1 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 1 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 1 Payout Date.
b. Two and one-half percent (2.5%) of Year 1 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 1 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
d. Two and one-half percent (2.5%) of Year 1 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
e. Two and one-half percent (2.5%) of Year 1 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent consideration
and Year 2 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 2 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 2 Payout Date.
b. Two and one-half percent (2.5%) of Year 2 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3
Actual Revenues are equal to or greater than Year 2 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 2 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4
Actual Revenues are equal to or greater than Year 2 Actual Revenues.
<PAGE>
d. Two and one-half percent (2.5%) of Year 2 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent consideration
and Year 3 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 3 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 3 Payout Date.
b. Two and one-half percent (2.5%) of Year 3 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4
Actual Revenues are equal to or greater than Year 3 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 3 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 3 Actual Revenues.
4. If STOCKHOLDERS have the right to be paid contingent consideration
and Year 4 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 4 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 4 Payout Date.
b. Two and one-half percent (2.5%) of Year 4 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent consideration
and Year 5 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 5 Excess Revenues will
be paid to STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
<PAGE>
a. "Revenues" means that portion of the aggregate revenues
reported by URSI for a fiscal year that are generated by operations acquired by
URSI by means of the Merger and operations acquired by means of the Merger
Transaction described in that certain Agreement and Plan of Reorganization by
and among URSI, Edward W. Morawski and Northland Auto Transporters, Inc. (the
"NATI Merger"), provided that revenues reported by URSI for fiscal year 1998
will be adjusted to reflect revenues of COMPANY and Northland Auto Transporters,
Inc. from January 1, 1998 until the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year 1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year 1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year 2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year 2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year 2002.
g. "Year 1 Target Revenues" means $11,175,024.
h. "Year 2 Target Revenues" means the greater of (i) 110% of Year
1 Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of Year
2 Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of Year
3 Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of Year
4 Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year 1
Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are equal
to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are zero.
<PAGE>
m. "Year 2 Excess Revenues" means the excess, if any, of Year 2
Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are equal
to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year 3
Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are equal
to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year 4
Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are equal
to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year 5
Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are equal
to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI
announces its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2000.
t. "Year 4 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues,
including without limitation decisions regarding the allocation and
non-allocation of capital and other resources, decisions regarding business that
will be accepted or rejected, personnel decisions including decisions to lay off
employees, and decisions to shut down or downsize operations, all without making
any offsetting adjustments to Revenues or contingent consideration, provided
only that such decisions are made in a good faith effort to maximize total
return to the shareholders of URSI to the extent that the same can be realized
without undue risk and in compliance with applicable laws.
<PAGE>
8. If the fiscal year of URSI is changed or operations acquired by
URSI by means of the Merger or the NATI Merger are sold, a reasonable adjustment
will be made to these provisions so that the contingent consideration paid to
STOCKHOLDERS will be approximately the same as it would have been if the fiscal
year had not been changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock to
be paid as contingent consideration, URSI Stock will be valued at Fair Market
Value as of the trading day the day before the contingent consideration is paid.
"Fair Market Value" of the URSI Stock as of a date means the market price per
share of such Shares determined by the Board of Directors of URSI as follows:
(a) if the URSI Stock is traded on a stock exchange on the date in question,
then the Fair Market Value will be equal to the closing price reported by the
applicable composite-transactions report for such date; (b) if the URSI Stock is
traded over-the-counter on the date in question and is classified as a national
market issue, then the Fair Market Value will be equal to the last-transaction
price quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
11. Despite anything to the contrary in this Annex I or elsewhere in
the Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS
as contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or
the number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
<PAGE>
13. The right to be paid contingent consideration is personal and
cannot be assigned by any STOCKHOLDER without the consent of URSI except upon
the death of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon any
STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
Edward W. Morawski 100%
---
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of
each Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,850 50% 50%
Keystone Towing, 377,624 50% 50%
Inc.
Northland Auto 588,435 50% 50%
Transporters, Inc.
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,649,523
<PAGE>
EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
FALCON TOWING AND AUTO DELIVERY, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 4
2.1 Manner of Conversion 4
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES OF URSI STOCK 4
4. PRE-CLOSING AND CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 9
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 11
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
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Page
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5.18 Compensation; Employment Agreements 15
5.19 Employee Plans 15
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 20
5.23 No Violations 23
5.24 Government Contracts 24
5.25 Absence of Changes 24
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 26
5.28 Relations with Governments 26
5.29 Disclosure 26
(B) Representations and Warranties of STOCKHOLDERS 26
5.30 Authority; Ownership 27
5.31 Preemptive Rights 27
5.32 No Intention to Dispose of URSI Stock 27
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 27
6.2 URSI Stock 28
6.3 Validity of Obligations 28
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI STOCK 29
6.7 No Side Agreements 30
6.8 Subsidiaries 30
6.9 Business; Real Property; Material Agreements; Financial
Information 30
6.10 Conformity with Law 30
6.11 No Violations 31
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 33
7.3 Prohibited Activities 34
7.4 No Shop 35
7.5 Notice to Bargaining Agents 36
7.6 Termination of Plans 36
7.7 URSI Prohibited Activities 36
7.8 Notification of Certain Matters 36
7.9 Amendment of Schedules 37
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7.10 Cooperation in Preparation of Registration Statement 38
7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY 39
8.1 Representations and Warranties; Performance of Obligations 39
8.2 Satisfaction 39
8.3 No Litigation 40
8.4 Stockholders' Release 40
8.5 Opinion of Counsel 40
8.6 Director Indemnification 40
8.7 Registration Statement 40
8.8 Consents and Approvals 41
8.9 Good Standing Certificates 41
8.10 No Waivers 41
8.11 No Material Adverse Change 41
8.12 Transfer Restrictions 41
8.13 Employment Agreements, Consulting Agreements, Leases
and Cosale Agreement 41
8.14 Tax Opinion 41
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 42
9.1 Representations and Warranties; Performance of Obligations 42
9.2 No Litigation 42
9.3 Examination of Final Financial Statements 42
9.4 No Material Adverse Effect 43
9.5 STOCKHOLDERS' Release 43
9.6 Satisfaction 43
9.7 Termination of Related Party Agreements 43
9.8 Opinion of Counsel 43
9.9 Consents and Approvals 43
9.10 Good Standing Certificates 44
9.11 Registration Statement 44
9.12 Employment Agreements, Consulting Agreements and Leases 44
9.13 Repayment of Indebtedness 44
9.14 FIRPTA Certificate 44
9.15 Insurance 44
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS 45
Preservation of Tax and Accounting Treatment 45
10.2 Disclosure 45
10.3 Cooperation in Tax Return Preparation 46
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10.4 Tax Return Preparation and Filing 46
10.5 Reorganization Status Information Reporting 47
10.6 Special Definitions Related to Tax Matters 47
10.7 Directors 48
10.8 Release from Guarantees 48
10.9 Preservation of Plans 48
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS 49
11.2 Indemnification by URSI 50
11.3 Third Person Claims 50
11.4 Exclusive Remedy 52
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 54
11.7 Special Contest Rights Related to Tax Matters 56
11.8 Special Notification Requirements Regarding Tax Disputes 57
11.9 Refunds 57
11.10 Optional Payment With Shares 57
12. TERMINATION OF AGREEMENT 57
12.1 Termination 57
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements 58
13. NONCOMPETITION 59
13.1 Prohibited Activities 59
13.2 Damages 60
13.3 Reasonable Restraint 60
13.4 Severability; Reformation 60
13.5 Independent Covenant 60
13.6 Materiality 61
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 61
14.1 STOCKHOLDERS 61
14.2 URSI 62
14.3 Damages 63
14.4 Survival 63
15. TRANSFER RESTRICTIONS 63
15.1 Transfer Restrictions 63
15.2 Permitted Transferees 64
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16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 64
16.2 Accredited Investors; Economic Risk; Sophistication 64
17. REGISTRATION RIGHTS 65
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 66
17.3 Registration Procedures 67
17.4 Underwriting Agreement 68
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 68
18. GENERAL 68
18.1 Cooperation 68
18.2 Successors and Assigns 69
18.3 Entire Agreement 69
18.4 Counterparts 69
18.5 Brokers and Agents 69
18.6 Expenses 69
18.7 Notices 70
18.8 Governing Law; Forum 71
18.9 Survival of Representations and Warranties 72
18.10 Exercise of Rights and Remedies 72
18.11 Time 72
18.12 Reformation and Severability 72
18.13 Remedies Cumulative 72
18.14 Captions 72
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SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
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Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
Material Documents 5.23
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Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), FALCON TOWING AND AUTO DELIVERY, INC., a
California corporation (the "COMPANY"), and the stockholders listed on Annex II
(the "STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., ASC Transportation Services, Caron Auto Brokers, Inc., Caron
Auto Works, Inc., Keystone Towing, Inc., Northland Auto Transporters, Inc.,
Northland Fleet Leasing Company, Silver State Tow & Recovery, Inc. and
Smith-Christensen Enterprises, Inc. (the "Other Companies") in order to acquire
additional vehicle towing and transport companies (the Other Companies, together
with the COMPANY, are collectively referred to herein as the "Founding
Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
State of the State of Delaware and, if required, the Articles of Merger or a
similar document to be signed, verified and filed with the relevant authorities
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in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 1,000 shares of common stock ("COMPANY Stock"), of
which 750 shares are issued and outstanding; and
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(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
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(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of URSI Stock and the
amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as
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set forth in Section 2.2, notwithstanding the number of shares of COMPANY Stock
such certificates represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of URSI
Stock, and the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger, shall occur and be deemed to be completed. If so
requested by any STOCKHOLDER at or prior to the Pre-Closing, URSI will use its
best efforts to cause all cash to be paid to such STOCKHOLDER on the CLOSING
DATE to be paid by the Underwriters (as defined in Section 5.29) by initiating a
wire transfer payment pursuant to instructions included in STOCKHOLDER's
request. After the Pre-Closing and until the Closing Date, no party may
withdraw, terminate or rescind any
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delivery made at the Pre-Closing unless this Agreement is terminated as provided
in Section 12. All documents delivered at the Pre-Closing shall be held by
Howard Rice for final delivery on the Closing Date as directed by the parties
and their counsel at the Pre-Closing, provided only that the Articles of Merger
and any similar document may be filed to become effective on the Closing Date.
Should the Agreement be terminated as provided in Section 12 prior to the
Closing Date, the parties shall take all steps necessary to rescind any such
filings, Howard Rice shall return all documents delivered at the Pre-Closing to
the parties who delivered the same, all such deliveries at the Pre-Closing will
be rescinded and a nullity, the Merger shall not become effective, the shares of
COMPANY Stock will not be converted into URSI Stock, and shares of URSI Stock
will not be delivered to STOCKHOLDERS. The documents delivered at Pre-Closing
shall include documents required to rescind, prior to the Closing Date, any
filing of the Articles of Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
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5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and the COMPANY's Subsidiaries, taken as a whole (a "Material
Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in which the
COMPANY is authorized or qualified to do business. True, complete and correct
copies of the Certificate of Incorporation and Bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the "Charter
Documents"), certified by the Secretary or Assistant Secretary of the COMPANY,
are all attached hereto as Schedule 5.1. A true, complete and correct copy of
each Certificate of Incorporation included in the Charter Documents, certified
by the Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind. All
of the issued and outstanding shares of the capital stock of the COMPANY have
been duly authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the STOCKHOLDERS and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder.
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5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY
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("Affiliates") other than in the ordinary course of business, within the
preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's Balance Sheet as of December 31, 1997 and 1996 and
Statements of Operations, Cash Flows and Retained Earnings for each of the years
in the three-year period ended December 31, 1997 (December 31, 1997 being
hereinafter referred to as the "Balance Sheet Date"). Such Financial Statements
have been prepared in accordance with KPMG Peat Marwick LLP's interpretation of
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted). Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present
fairly the financial position of the COMPANY (and each of the COMPANY's
Subsidiaries on a consolidated basis) as of the dates indicated thereon, and
such Statements of Operations, Cash Flows and Retained Earnings present fairly
the results of their respective operations for the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such
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balance sheet were being prepared immediately prior to Closing or if such
liabilities represent liabilities of the nature described in Section 5.13,
Section 5.20 and/or Section 5.22 (excluding items subject to any knowledge
qualifications contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the
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amount shown on Schedule 5.11, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or
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Hazardous Substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the COMPANY
or any of the COMPANY's Subsidiaries where Solid Wastes, Hazardous Wastes or
Hazardous Substances have been treated, stored, used, disposed of or otherwise
handled; (iii) there have been no releases (as defined in Environmental Laws)
at, from, under, in or on any property owned or operated by the COMPANY or any
of the COMPANY's Subsidiaries except as permitted by Environmental Laws; (iv) to
the knowledge of the COMPANY there is no on-site or off-site location to which
the COMPANY or any of the COMPANY's Subsidiaries has transported or disposed of
Solid Wastes, Hazardous Wastes or Hazardous Substances or arranged for the
transportation of Solid Wastes, Hazardous Wastes or Hazardous Substances, which
site is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
any of the COMPANY's Subsidiaries or URSI for any clean-up cost, remedial work,
damage to natural resources or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) to the knowledge of the COMPANY the
COMPANY has no contingent liability in connection with any release of any Solid
Waste, Hazardous Waste or Hazardous Substance into the environment. Schedule
5.13 lists all releases of Hazardous Wastes or Hazardous Substances by the
COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500, including in the case of
(z) true, complete and correct copies of all such leases and including in cases
(x), (y) and (z) an indication as to which real and personal property is
currently owned, or was formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as shown on Schedule 5.14, all
of the trucks and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedule 5.14 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.14 are in full force and effect and constitute valid and binding agreements on
the COMPANY (or a COMPANY Subsidiary, as applicable), and to the knowledge of
the COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their respective
terms. All fixed assets used by the COMPANY and the COMPANY's Subsidiaries that
are material to the
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operation of their respective businesses are either owned by the COMPANY or the
COMPANY's Subsidiaries or leased under an agreement indicated on Schedule 5.14.
Schedule 5.14 shall, without limitation, contain true, complete and correct
copies of all title reports and title insurance policies received or owned by
the COMPANY or the COMPANY's Subsidiaries. The COMPANY has also provided in
Schedule 5.14 a summary description of all plans or projects which have been
memorialized in any written or electronic document or file and involves the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, with respect to which the
COMPANY (or any of the COMPANY's Subsidiaries) has made any expenditure in the
two-year period prior to the date of the Agreement in excess of $10,000, or
which if pursued by the COMPANY (or such Subsidiary) would require additional
expenditures of capital in excess of $10,000. Except as set forth on Schedule
5.14 and except for liens excepted in Section 7.3(vi)(1) and (3), there are no
liens against the COMPANY's properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
leases, liens, pledges or other security agreements) (a) as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to URSI, except
that leases set forth on Schedule 5.14 need not be set forth on Schedule 5.15.
Except to the extent set forth on Schedule 5.15, (i) none of the COMPANY's
(including the COMPANY's Subsidiaries) significant customers has cancelled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel any Material Contract or substantially
reduce utilization of the services provided by the COMPANY (including the
COMPANY's Subsidiaries), and (ii) the COMPANY and the COMPANY's Subsidiaries
have complied with all material commitments and obligations pertaining to any
Material Contract, and are not in default under any such Material Contract, and
no notice of default has been received, and no Stockholder or any affiliate of
any Stockholder is a party to any such Material Contract. Except as set
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forth in Schedule 5.15, the COMPANY and the COMPANY's Subsidiaries have not been
the subject of any election in respect of union representation of employees and
are not bound by or subject to (and none of its respective assets or properties
is bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.15, no employees of the COMPANY or its Subsidiaries are
represented by any labor union or covered by any collective bargaining agreement
and no campaign to establish such representation has ever occurred or is in
progress. There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries) and any
group of its employees, nor has the COMPANY (including the COMPANY's
Subsidiaries) experienced any labor interruptions over the past three years, and
the COMPANY considers its relationship with employees to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
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plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
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(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any
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withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
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(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
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(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect
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timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the
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meaning of Section 168 of the Code. No Acquired Party is a party to any "safe
harbor lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to
any "long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-Closing
Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of
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the transaction. Moreover, shares of COMPANY Stock and shares of URSI Stock held
by STOCKHOLDERS and otherwise sold, redeemed, or disposed of on or after January
1, 1997, including after the Closing Date, will be considered in making this
representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any
STOCKHOLDER-employees of the COMPANY will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not
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exceed 7.5% of the aggregate consideration to be received by such STOCKHOLDERS
pursuant to the Merger.
(xxvi) Intentionally Omitted.
(xxvii) Intentionally Omitted.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
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(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
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5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the
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STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, or of the IPO to
occur at a particular price or within a particular range of prices or to occur
at all; and (iii) the decision of STOCKHOLDERS to enter into this Agreement, or
to vote in favor of or consent to the proposed Merger, has been made independent
of, and without reliance upon, any statements, opinions or other communications
of, or due diligence investigations which have been or will be made or performed
by any prospective Underwriter, relative to URSI or the prospective IPO. The
Underwriters shall have no obligation to the STOCKHOLDERS with respect to any
disclosure contained in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
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be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
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6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly
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issued, fully paid and nonassessable. All of the shares of URSI Stock issued to
persons set forth on Annex III and, based on the representations of STOCKHOLDERS
contained in this Agreement and in the documents delivered to URSI pursuant
hereto, to STOCKHOLDERS pursuant to this Agreement, were or will be offered,
issued, sold and delivered by URSI in compliance with all applicable state and
federal laws concerning the issuance of securities and none of such shares were
or will be issued in violation of the preemptive rights of any past or present
stockholder. On the Closing Date the capitalization of URSI will be as set forth
in the Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or
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contingent, other than those incurred in connection with this Agreement, the
Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. URSI (including URSI's Subsidiaries)
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a URSI Material Adverse Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
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6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY after the Merger will be separate consideration for, or allocable
to, any of their shares of the COMPANY; none of the shares of URSI Stock
received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
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7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Founding Companies other than the COMPANY as confidential in
accordance with the provisions of Section 14 hereof. In addition, URSI will
cause each of the Founding Companies other than the COMPANY to enter into a
provision similar to this Section 7.1 requiring each such Founding Company to
keep confidential any information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
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(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
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make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely
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affect the Tax liability of the Company or any Acquired Party (or URSI following
the Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
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(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-
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Closing, unless such Schedule is to be amended to reflect an event occurring
other than in the ordinary course of business. In the event that the COMPANY
amends or supplements a Schedule pursuant to this Section 7.9, and URSI and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In
the event that URSI amends or supplements a Schedule pursuant to this Section
7.9 and COMPANY and a majority of the Founding Companies do not consent to the
effectiveness of such amendment or supplement at or before the Pre-Closing, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 7.9. In the event
that one of the other Founding Companies amends or supplements a Schedule
pursuant to Section 7.9 of one of the Other Agreements, URSI shall give the
COMPANY notice promptly after it has knowledge thereof. If URSI, COMPANY and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. For
purposes of this Section 7.9, URSI shall be deemed to have given its consent to
the effectiveness of any amendment or supplement to a Schedule if URSI does not
notify COMPANY of its disapproval within 48 hours after URSI is notified of such
amendment or supplement, and COMPANY and each other Founding Company shall be
deemed to have given its consent to the effectiveness of any amendment or
supplement to a Schedule if COMPANY or such other Founding Company, as
applicable, does not notify URSI of its disapproval within 48 hours after
COMPANY or such other Founding Company, as applicable, is notified of such
amendment or supplement. Except as otherwise provided herein, no amendment of or
supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the
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STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
financial statements of the COMPANY for any quarter subsequent to December 31,
1997 are required to be included in the Registration Statement, the COMPANY
shall provide, and URSI shall have had sufficient time to review, the unaudited
balance sheet and statements of income, cash flows and retained earnings of the
COMPANY as of the end of such quarter, disclosing no Material Adverse Change in
the financial condition or results of operations of the COMPANY. Such financial
statements, which shall be deemed to be Financial Statements (as described in
Section 5.9), shall have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted therein). To the extent such Financial Statements
shall be included or reflected in the Registration Statement, any events or
circumstances reflected therein which might constitute a Material Adverse Effect
with respect to the COMPANY shall be deemed to have been waived by URSI and URSI
shall have no rights in respect of such Material Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
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STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced prior to the initial filing
with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
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amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
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pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of URSI as a result of
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which the management of URSI deems it inadvisable to proceed with the
transactions hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY for the fiscal quarters beginning after the Balance Sheet
Date, and the unaudited consolidated statement of income, cash flows and
retained earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no material adverse change in the financial
condition of the COMPANY or the results of its operations from the financial
statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Cohen
Primiani & Foster, counsel to the COMPANY and the STOCKHOLDERS, dated the
Pricing Date, in the form annexed hereto as Annex VI, and the Underwriters shall
have received a copy of the same opinion addressed to them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the
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COMPANY shall have obtained and delivered to URSI such additional consents to
the Merger as URSI may reasonably request including, without limitation, URSI's
receipt on or prior to the Pricing Date of those licenses, franchises, permits
or governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
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9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
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the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to
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period and (b) prepare such Tax Returns in a manner consistent with prior years,
in each case as determined in the good faith judgment of the preparer of such
returns; provided, however, that in all events such Tax Returns shall be
prepared in a manner consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(b) "Interim Period" shall mean any taxable period commencing
prior to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period
that begins before the Closing Date and ends on or before the Closing Date and
(ii) the portion of any Interim Period through and including the Closing Date.
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(d) "Post-Closing Period" means any taxable period that begins
after the Closing Date, and, with respect to any Interim Period, the portion of
such Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income,
gross receipts, ad valorem, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A), customs duties, capital stock, net worth, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, workers compensation, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government,
including any interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations,
claims for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, having or purporting to have jurisdiction with respect to
any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such guarantees on indebtedness
being assumed by URSI. URSI agrees to indemnify the STOCKHOLDERS against any and
all claims made by lenders under such guarantee which arise as a result of
URSI's failure to cause such guarantee to be released on or prior to the
Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify
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under Section 401(a) of the Code and makes contributions to such plan at or
above the level stated in Schedule 10.9, or (ii) in the case of each other Plan,
URSI establishes a replacement Plan providing equivalent or better benefits,
provided that if the cost of providing equivalent benefits should, in the good
faith judgment of URSI, become commercially unreasonable, the replacement plan
established by URSI may have benefits that are, in the good faith judgment of
URSI, as close to equivalent as can be obtained at commercially reasonable cost.
There are no intended third party beneficiaries of this Section 10.9, and after
the Closing Date it can be waived or modified by URSI and STOCKHOLDERS (or their
successors) shown as owning two-thirds of COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except with respect to
Sections 5.30 through 5.32, which shall be several), will indemnify, defend,
protect and hold harmless URSI, the COMPANY and the Surviving Corporation at all
times from and after the date of this Agreement until the Expiration Date as
defined in Section 5 above, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by URSI, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith (other than the
representations and warranties provided in Section 5.22, for which Section 11.6
provides special indemnity provisions); (ii) any nonfulfillment of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, (x) arising out of or based upon any
untrue statement of a material fact relating to the COMPANY (including the
COMPANY's Subsidiaries) or the STOCKHOLDERS that is provided to URSI or its
counsel by the COMPANY or the STOCKHOLDERS and contained in any preliminary
prospectus relating to the IPO, the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or (y)
arising out of or based upon any omission to state therein a material fact
relating to the COMPANY (including the COMPANY's Subsidiaries) or the
STOCKHOLDERS that is required to be stated therein or necessary to make the
statements therein not misleading, and not provided to URSI or its counsel by
the COMPANY or the STOCKHOLDERS, provided, however, that such
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indemnity shall not inure to the benefit of URSI, the COMPANY or the Surviving
Corporation to the extent that such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to URSI counsel and to URSI for inclusion in the final prospectus,
and such information was not so included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the
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Indemnifying Party shall not settle any criminal proceeding without the consent
of the Indemnified Party. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. All Indemnified Parties shall use the same counsel, which shall be the
counsel selected by Indemnifying Party, provided that if such counsel shall have
a conflict of interest that prevents such counsel from representing Indemnified
Party, Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel. After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses. If the Indemnifying Party
desires to accept a final and complete settlement of any such Third Person claim
and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person and the Indemnified Party shall reimburse the Indemnifying Party
for any additional costs of defense which it subsequently incurs with respect to
such claim and all additional costs of settlement or judgment. If the
Indemnifying Party does not undertake to defend such matter as to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for any Tax benefits, Tax detriments or
insurance proceeds in determining the amount of any indemnification obligation
under this Section,
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provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy. All indemnification payments
under this Section shall be deemed adjustments to the Merger consideration
provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement unless this Agreement is terminated prior to the Closing
Date, in which event the Indemnification Threshold is an amount equal to two
percent (2%) of the Minimum Value set forth in Annex I. All such amounts
otherwise payable by one or more STOCKHOLDERS in excess of the amount so offset
and reduced shall be paid without offset or reduction pursuant to this Section
11.5(i). This Section 11.5(i) shall not apply to amounts payable pursuant to
Section 11.6. For purposes of determining the Indemnification Threshold, the
URSI Stock shall be valued at the initial price of the URSI Stock sold to the
public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no
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event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the amount of the proceeds received by
such STOCKHOLDER pursuant to this Agreement, calculated as provided in Section
11.5(iv), with respect to Specially Limited Claims. Specially Limited Claims are
all claims that may be made pursuant to this Agreement, including this Section
11, except claims based on (a) breach of representations and warranties in
Section 5.13, (b) breach of representations and warranties in Section 5.19 or
Section 5.20 or (c) Section 11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the amount of proceeds received by such
STOCKHOLDER pursuant to this Agreement. The amount of proceeds received by each
STOCKHOLDER shall be calculated (for purposes of Section 11.5(iii) and this
Section 11.5(iv)) by adding (a) the cash proceeds paid to such STOCKHOLDER
pursuant to Section 2.2 hereof prior to the date that the indemnity obligation
of such STOCKHOLDER is paid, plus (b) the net proceeds to such STOCKHOLDER from
the sale of such STOCKHOLDER's URSI Stock received pursuant to Section 2.2
hereof prior to the date that the indemnity obligation of such STOCKHOLDER is
paid, plus (c) the Fair Market Value (as defined in Annex I) of the unsold
shares of URSI Stock received by such STOCKHOLDER pursuant to Section 2.2 prior
to the date that the indemnity obligation of such STOCKHOLDER is paid, valued on
the trading day prior to the day the indemnification obligation is paid.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first
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been provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and all Taxes
(including without limitation any obligation to contribute to the payment of, or
be entitled to share in the refund of, a Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that includes
or included the COMPANY or any Acquired Party) which are (i) imposed on any
member (other than the COMPANY or any Acquired Party) of the consolidated,
unitary or combined group which includes or included the COMPANY or any Acquired
Party or (ii) imposed on the COMPANY or any Acquired Party in respect of its
income, business, property or operations or for which the COMPANY or any
Acquired Party may otherwise be liable (A) for any Pre-Closing Period, (B)
resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to any items of income or gain of an
entity treated as a partnership reported by the COMPANY or any Acquired Party as
a partner, to the extent such items are properly attributable
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to periods of the "partnership" ending on or before the Closing Date, or (G)
attributable to any discharge of indebtedness that may result from any capital
contributions by STOCKHOLDERS (or an affiliate of STOCKHOLDERS) to the COMPANY
or any Acquired Party of any intercompany indebtedness owed by COMPANY to any
STOCKHOLDER (or an affiliate of any STOCKHOLDER), but, in each case, only to the
extent such Taxes or the entitlement to such refund are not reflected on the
applicable Company Financial Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv) or Section 5.22(xxv) and (y) any liability imposed
on URSI, the COMPANY and any Acquired Party (or any affiliate of such companies)
attributable to any breach of a warranty or representation made by STOCKHOLDERS
in Section 5.22, excluding Section 5.22(xx), Section 5.22(xxiv) and Section
5.22(xxv).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party with respect to any
Post-Closing Period and (y) any liability imposed on STOCKHOLDERS attributable
to any breach of a warranty or representation made by URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall
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control regarding the defense and handling of any such third-party claim that
could give rise to an indemnification obligation on the part of one party to
another. In addition, and notwithstanding anything else in Article 11 to the
contrary, the party with the right to control a contest has the right to choose
counsel of its choice regarding such contest. Furthermore, there shall be no
limit on (i) the time period during which a claim for indemnification may be
made under this Section 11.6 or (ii) the minimum or maximum amount of indemnity
payments that may be recovered pursuant to this Section 11.6 (other than (x)
each party's obligation to make claims for indemnification promptly and without
undue delay and (y) the aggregate limit for all indemnity payments imposed on a
STOCKHOLDER provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY
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(including any Acquired Party) shall execute or cause to be executed any power
of attorney or other document or take such actions as requested by the
STOCKHOLDERS to enable the STOCKHOLDERS to take any action STOCKHOLDERS deem
appropriate with respect to any proceedings relating thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre-Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions
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contained herein, and such default shall not have been cured and shall not
reasonably be expected to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
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independent contractor, consultant or advisor, or as a sales representative, in
the vehicle towing, transport, salvage or auction businesses, within one hundred
(100) miles of where the COMPANY conducted business prior to the effectiveness
of the Merger (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
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13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations under this
Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of
this Section 13 if URSI and/or any subsidiary thereof shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against URSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
URSI of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in this Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto, except that upon URSI's admission in
writing, or a final judicial determination which is not the subject of appeal or
further appeal by URSI, that URSI has materially breached a STOCKHOLDER's
Employment
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Agreement (if applicable), right to have URSI Stock registered under the 1933
Act pursuant to Section 17.1 or 17.2, or right to receive contingent
consideration as provided in section C of Annex I, and URSI's failure to cure
such material breach within 30 days of such admission or final judicial
determination, whichever is applicable, then the covenants contained in this
Section 13 with respect to such STOCKHOLDER will expire. The covenants contained
in this Section 13 shall have no effect if the transactions contemplated by this
Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under color of law, provided that prior
to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS
shall, if possible, give prior written notice thereof to URSI and provide URSI
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this section,
URSI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting URSI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies
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that are valuable, special and unique assets of the COMPANY's business. URSI
agrees that, prior to the Closing, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the COMPANY, (b) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2 and (c) to the Founding Companies other than the COMPANY and their
representatives pursuant to Section 7.1(i), unless (i) such information becomes
known to the public generally through no fault of URSI (ii) disclosure is
required by law or the order of any governmental authority under color of law,
provided that prior to disclosing any information pursuant to this clause (ii),
URSI shall, if possible, give prior written notice thereof to the COMPANY and
the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. Upon termination of this Agreement prior
to the Closing Date for any reason other than the material breach or default of
any STOCKHOLDER or COMPANY, URSI will return to COMPANY all documents containing
confidential information of COMPANY that were provided to URSI by COMPANY or
STOCKHOLDERS and all summaries, abstractions, projections, pro formas or like
material prepared by URSI incorporating such confidential information. In the
event of a breach or threatened breach by URSI of the provisions of this
section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction
restraining URSI from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the COMPANY and
the STOCKHOLDERS from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1,
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for a period of one year from the Closing Date none of the STOCKHOLDERS shall
(i) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (a) any shares of URSI Stock received by the STOCKHOLDERS
in the Merger, or (b) any interest (including, without limitation, an option to
buy or sell) in any such shares of URSI Stock, in whole or in part, and no such
attempted transfer shall be treated as effective for any purpose; or (ii) engage
in any transaction, whether or not with respect to any shares of URSI Stock or
any interest therein, the intent or effect of which is to reduce the risk of
owning the shares of URSI Stock acquired pursuant to Section 2 hereof
(including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as URSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel) by the terms
and conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which a majority of the interests therein by
value is owned by the STOCKHOLDER and members of the STOCKHOLDER's family, and
(y) which is and continues to be controlled by the STOCKHOLDER and members of
the STOCKHOLDER'S family for the period set forth in Section 15.1.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
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17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests, provided that URSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to URSI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a reorganization described in Section 368(a)(1)(A)
of the Code. In addition, if URSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than URSI is greater than the number of
such shares which can be offered without adversely affecting the offering, URSI
may reduce the number of shares offered for the accounts of such persons to a
number deemed satisfactory by such managing underwriter, provided that such
reduction shall be made first by reducing the number of shares to be sold by
persons other than URSI, the stockholders named on Annex III hereto, the
stockholders of the Founding Companies, and any person or persons who have
required such registration pursuant to "demand" registration rights granted by
URSI; thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of URSI Stock owned by such stockholder
immediately after the Closing, provided that if any stockholder does not wish to
sell all shares such stockholder is permitted to sell, the opportunity to sell
additional shares shall be reallocated in the same manner to those stockholders
named in Annex III hereto and stockholders of the Founding Companies who wish to
sell more shares until no more shares can be sold by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements
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which have (i) not been previously registered or sold, (ii) which are not
entitled to be sold under Rule 144(k) (or any similar or successor provision)
and (iii) which have an aggregate market value in excess of $5 million (based on
the average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER may request in writing
that URSI file a registration statement under the 1933 Act requesting such
number of such STOCKHOLDER's shares of URSI Stock as is required to be sold to
pay the difference between the cash proceeds and
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the amount of the indemnification obligation, plus legal and other expenses,
including expenses of the offering, provided arrangements are made to URSI's
reasonable satisfaction that the proceeds will be used solely for the purpose of
such indemnification and the payment of related expenses and that arrangements
are made to the reasonable satisfaction of URSI that the proceeds of such sale
will be used solely for the purpose of such indemnification and the payment of
related expenses, and that no such request may be made until after one hundred
eighty (180) days following the Closing Date without the consent of the managing
underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
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consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the
Pre-Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be modified or amended only by a written instrument
executed by the STOCKHOLDERS, the COMPANY and URSI, acting through their
respective officers, duly authorized by their respective Boards of Directors.
Any
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disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the STOCKHOLDERS and incurred
prior to the Pricing Date may be paid from COMPANY funds rather than from
personal funds of the STOCKHOLDERS, provided that the STOCKHOLDERS provide to
URSI, prior to the Pricing Date, a detailed statement setting forth the type and
amount of all such fees, expenses or disbursements so paid, and, provided
further, that the aggregate amount of same shall be deducted, on a
dollar-for-dollar basis, from the amount of cash into which the COMPANY Stock
shall be converted pursuant to Section 2.2 hereof. Notwithstanding the foregoing
provisions of
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Section 18.6, URSI shall further pay or reimburse reasonable costs of counsel or
co-counsel for the Company if and to the extent so mutually agreed in advance
between URSI and such counsel, in circumstances where URSI believes it obtained
or may have obtained a material benefit, in light of market conditions and other
factors, by reason of such counsel or co-counsel expediting the transaction
which is the subject of this Agreement and reducing the time required to
complete this Agreement and the Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
Falcon Towing and Auto Delivery, Inc.
3650 Rockwell Ave.
El Monte, CA 91731
Attn: John David Floyd
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and marked "Personal and Confidential" with copies to:
Richard Schneider, Esq.
Cohen Primiani & Foster
2029 Century Park East #400
Los Angeles, CA 90067
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the
California state court of general jurisdiction in Los Angeles County, California
(or, if there is federal jurisdiction, then the exclusive jurisdiction and venue
of the United States District Court having jurisdiction over Los Angeles
County). The parties hereby consent to the personal and exclusive jurisdiction
and venue of said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
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<PAGE>
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
__________________________________ By _______________________________
Name:
Title:
WITNESS: STOCKHOLDERS:
__________________________________ __________________________________
John David Floyd
WITNESS: FALCON TOWING AND AUTO
DELIVERY, INC.
_________________________________ By _______________________________
Name:
Title:
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<PAGE>
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
FALCON TOWING AND AUTO DELIVERY, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $4,282,200 in cash.
2. 356,850 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $8,564,400.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate
the Merger if the aggregate value of cash and URSI Stock (valued at the IPO
initial public offering price) is less than the Minimum Value of $8,029,125.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
John David Floyd 356,850 $4,282,200
------- ----------
TOTALS: 356,850 $4,282,200
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 1 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 1 Payout Date.
<PAGE>
b. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
c. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
d. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
e. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 2 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date.
b. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
c. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
d. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 3 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date.
b. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
c. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
<PAGE>
4. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 4 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date.
b. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 5 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 5 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the revenues reported by
URSI for a fiscal year that are generated by operations acquired by URSI by
means of the Merger, provided that revenues reported by URSI for fiscal year
1998 will be adjusted to reflect revenues of COMPANY from January 1, 1998 until
the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year
1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year
1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year
2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year
2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year
2002.
g. "Year 1 Target Revenues" means $7,200,000.
h. "Year 2 Target Revenues" means the greater of (i) 110% of
Year 1 Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of
Year 2 Actual Revenues or (ii) 110% of Year 2 Target Revenues.
<PAGE>
j. "Year 4 Target Revenues" means the greater of (i) 110% of
Year 3 Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of
Year 4 Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year
1 Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are
equal to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are
zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year
2 Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are
equal to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are
zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year
3 Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are
equal to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are
zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year
4 Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are
equal to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are
zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year
5 Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are
equal to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are
zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI
announces its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2000.
t. "Year 4 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2002.
<PAGE>
7. URSI will be entitled to make decisions that impact Revenues,
including without limitation decisions regarding the allocation and
non-allocation of capital and other resources, decisions regarding business that
will be accepted or rejected, personnel decisions including decisions to lay off
employees, and decisions to shut down or downsize operations, all without making
any offsetting adjustments to Revenues or contingent consideration, provided
only that such decisions are made in a good faith effort to maximize total
return to the shareholders of URSI to the extent that the same can be realized
without undue risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired by
URSI by means of the Merger are sold, a reasonable adjustment will be made to
these provisions so that the contingent consideration paid to STOCKHOLDERS will
be approximately the same as it would have been if the fiscal year had not been
changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock
to be paid as contingent consideration, URSI Stock will be valued at Fair Market
Value as of the trading day the day before the contingent consideration is paid.
"Fair Market Value" of the URSI Stock as of a date means the market price per
share of such Shares determined by the Board of Directors of URSI as follows:
(a) if the URSI Stock is traded on a stock exchange on the date in question,
then the Fair Market Value will be equal to the closing price reported by the
applicable composite-transactions report for such date; (b) if the URSI Stock is
traded over-the-counter on the date in question and is classified as a national
market issue, then the Fair Market Value will be equal to the last-transaction
price quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
11. Despite anything to the contrary in this Annex I or elsewhere in
the Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS
as contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or
the number of shares of URSI Stock to be paid will be finally
<PAGE>
determined by the independent certified public accountants engaged by URSI to
audit the financial statements of URSI for its most recently completed fiscal
year.
13. The right to be paid contingent consideration is personal and
cannot be assigned by any STOCKHOLDER without the consent of URSI except upon
the death of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon
any STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
John David Floyd 100%
---
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of each
Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Keystone Towing,
Inc. 377,624 50% 50%
Northland Auto
Transporters, Inc. 588,435 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,396,515
<PAGE>
EXHBIT 2.4
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
SMITH-CHRISTENSEN ENTERPRISES, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of
Directors of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 4
2.1 Manner of Conversion 4
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES 4
4. PRE-CLOSING AND CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 9
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 11
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and
Commitments 13
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Page
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5.16 Intentionally Deleted 14
5.17 Insurance 14
5.18 Compensation; Employment Agreements 15
5.19 Employee Plans 15
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 20
5.23 No Violations 23
5.24 Government Contracts 24
5.25 Absence of Changes 24
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 26
5.28 Relations with Governments 26
5.29 Disclosure 26
(B) Representations and Warranties of STOCKHOLDERS 26
5.30 Authority; Ownership 27
5.31 Preemptive Rights 27
5.32 No Intention to Dispose of URSI Stock 27
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 27
6.2 URSI Stock 28
6.3 Validity of Obligations 28
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI STOCK 29
6.7 No Side Agreements 30
6.8 Subsidiaries 30
6.9 Business; Real Property; Material Agreements;
Financial Information 30
6.10 Conformity with Law 30
6.11 No Violations 31
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 33
7.3 Prohibited Activities 34
7.4 No Shop 35
7.5 Notice to Bargaining Agents 36
7.6 Termination of Plans 36
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<PAGE>
Page
7.7 URSI Prohibited Activities 36
7.8 Notification of Certain Matters 36
7.9 Amendment of Schedules 37
7.10 Cooperation in Preparation of Registration Statement 38
7.11 Examination of Final Financial Statements 38
7.12 Lien Acceleration 39
7.13 Repayment 39
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY 39
8.1 Representations and Warranties; Performance of
Obligations 39
8.2 Satisfaction 39
8.3 No Litigation 40
8.4 Stockholders' Release 40
8.5 Opinion of Counsel 40
8.6 Director Indemnification 40
8.7 Registration Statement 41
8.8 Consents and Approvals 41
8.9 Good Standing Certificates 41
8.10 No Waivers 41
8.11 No Material Adverse Change 41
8.12 Transfer Restrictions 42
8.13 Employment Agreements, Consulting Agreements,
Leases and Cosale Agreement 42
8.14 Tax Opinion 42
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 42 9.1
Representations and Warranties; Performance of
Obligations 42
9.2 No Litigation 42
9.3 Examination of Final Financial Statements 43
9.4 No Material Adverse Effect 43
9.5 STOCKHOLDERS' Release 43
9.6 Satisfaction 43
9.7 Termination of Related Party Agreements 43
9.8 Opinion of Counsel 43
9.9 Consents and Approvals 44
9.10 Good Standing Certificates 44
9.11 Registration Statement 44
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<PAGE>
Page
----
9.12 Employment Agreements, Consulting Agreements and
Leases 44
9.13 Repayment of Indebtedness 44
9.14 FIRPTA Certificate 45
9.15 Insurance 45
9.16 Release and Payment 45
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS 45
10.1 Preservation of Tax and Accounting Treatment 45
10.2 Disclosure 46
10.3 Cooperation in Tax Return Preparation 46
10.4 Tax Return Preparation and Filing 46
10.5 Reorganization Status Information Reporting 47
10.6 Special Definitions Related to Tax Matters 48
10.7 Directors 48
10.8 Release from Guarantees 49
10.9 Preservation of Plans 49
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS 49
11.2 Indemnification by URSI 50
11.3 Third Person Claims 51
11.4 Exclusive Remedy 52
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 54
11.7 Special Contest Rights Related to Tax Matters 57
11.8 Special Notification Requirements Regarding Tax
Disputes 57
11.9 Refunds 57
11.10 Optional Payment With Shares 58
12. TERMINATION OF AGREEMENT 58
12.1 Termination 58
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements 59
13. NONCOMPETITION 59
13.1 Prohibited Activities 59
13.2 Damages 60
13.3 Reasonable Restraint 60
13.4 Severability; Reformation 61
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<PAGE>
Page
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13.5 Independent Covenant 61
13.6 Materiality 61
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 61
14.1 STOCKHOLDERS 62
14.2 URSI 62
14.3 Damages 63
14.4 Survival 63
15. TRANSFER RESTRICTIONS 63
15.1 Transfer Restrictions 63
15.2 Permitted Transferees 64
16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 65
16.2 Accredited Investors; Economic Risk; Sophistication 65
17. REGISTRATION RIGHTS 65
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 66
17.3 Registration Procedures 68
17.4 Underwriting Agreement 68
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 68
18. GENERAL 69
18.1 Cooperation 69
18.2 Successors and Assigns 69
18.3 Entire Agreement 69
18.4 Counterparts 69
18.5 Brokers and Agents 69
18.6 Expenses 70
18.7 Notices 71
18.8 Governing Law; Forum 72
18.9 Survival of Representations and Warranties 72
18.10 Exercise of Rights and Remedies 72
18.11 Time 72
18.12 Reformation and Severability 72
18.13 Remedies Cumulative 73
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<PAGE>
Page
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18.14 Captions 73
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<PAGE>
SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Annex XII - Side Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
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<PAGE>
Schedule 5.22 - Tax Returns and Examinations
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary Course
Between Balance Sheet Date and Closing Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
-viii-
<PAGE>
TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
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<PAGE>
Material Documents 5.23
Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), Smith- Christensen Enterprises, Inc., a Nevada
corporation (the "COMPANY"), and the stockholders listed on Annex II (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transport, ASC Transportation Services, Caron Auto Brokers, Inc., Caron Auto
Works, Inc., Falcon Auto Delivery, Inc., George Little Investments, Inc.,
Keystone Towing, Northland Auto Transporters, Inc., Northland Fleet Leasing
Company and Silver State Tow & Recovery, Inc. (the "Other Companies") in order
to acquire additional vehicle towing and transport companies (the Other
Companies, together with the COMPANY, are collectively referred to herein as the
"Founding Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
State of the State of Delaware and, if required, the Articles of Merger or a
similar document to be signed, verified and filed with the relevant authorities
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in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of two thousand five hundred (2,500) shares of no par
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value capital stock, ("COMPANY Stock"), of which two thousand two hundred
ninety-five (2,295) shares are issued and outstanding; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
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2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of
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such certificates, be entitled to receive the number of shares of URSI Stock and
the amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as set forth in Section 2.2,
notwithstanding the number of shares of COMPANY Stock such certificates
represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of
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URSI Stock, and the delivery of a certified check or checks in an amount equal
to the cash portion of the consideration which the STOCKHOLDERS shall be
entitled to receive pursuant to the Merger, shall occur and be deemed to be
completed. If so requested by any STOCKHOLDER at or prior to the Pre- Closing,
URSI will use its best efforts to cause all cash to be paid to such STOCKHOLDER
on the CLOSING DATE to be paid by the Underwriters (as defined in Section 5.29)
by initiating a wire transfer payment pursuant to instructions included in
STOCKHOLDER's request. After the Pre-Closing and until the Closing Date, no
party may withdraw, terminate or rescind any delivery made at the Pre-Closing
unless this Agreement is terminated as provided in Section 12. All documents
delivered at the Pre-Closing shall be held by Howard Rice for final delivery on
the Closing Date as directed by the parties and their counsel at the
Pre-Closing, provided only that the Articles of Merger and any similar document
may be filed to become effective on the Closing Date. Should the Agreement be
terminated as provided in Section 12 prior to the Closing Date, the parties
shall take all steps necessary to rescind any such filings, Howard Rice shall
return all documents delivered at the Pre- Closing to the parties who delivered
the same, all such deliveries at the Pre- Closing will be rescinded and a
nullity, the Merger shall not become effective, the shares of COMPANY Stock will
not be converted into URSI Stock, and shares of URSI Stock will not be delivered
to STOCKHOLDERS. The documents delivered at Pre-Closing shall include documents
required to rescind, prior to the Closing Date, any filing of the Articles of
Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
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until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and the COMPANY's Subsidiaries, taken as a whole (a "Material
Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in which the
COMPANY is authorized or qualified to do business. True, complete and correct
copies of the Certificate of Incorporation and Bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the "Charter
Documents"), certified by the Secretary or Assistant Secretary of the COMPANY,
are all attached hereto as Schedule 5.1. A true, complete and correct copy of
each Certificate of Incorporation included in the Charter Documents, certified
by the Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens,
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security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the issued and outstanding shares of the
capital stock of the COMPANY have been duly authorized and validly issued, are
fully paid and nonassessable, are owned of record and beneficially by the
STOCKHOLDERS and further, such shares were offered, issued, sold and delivered
by the COMPANY in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
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including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY ("Affiliates") other
than in the ordinary course of business, within the preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's Balance Sheet as of January 31, 1996 and 1997 and for the
twelve-month period ended December 31, 1997 and Statements of Operations, Cash
Flows and Retained Earnings for each of the years ended January 31, 1996 and
1997 and for the twelve-month period ended December 31, 1997 (December 31, 1997
being hereinafter referred to as the "Balance Sheet Date"). Such Financial
Statements have been prepared in accordance with KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as noted). Except as
set forth on Schedule 5.9, such Balance Sheets as of January 31, 1997 and
December 31, 1997 present fairly the financial position of the COMPANY and the
COMPANY's only Subsidiary on a consolidated basis as of the dates indicated
thereon, and such Statements of Income, Cash Flows and Retained Earnings present
fairly the results of their respective operations on a consolidated basis for
the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the COMPANY at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
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(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the COMPANY at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such balance
sheet were being prepared immediately prior to Closing or if such liabilities
represent liabilities of the nature described in Section 5.13, Section 5.20
and/or Section 5.22 (excluding items subject to any knowledge qualifications
contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit
or proceeding;
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(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the amount shown on Schedule 5.11, net of
reserves reflected in the balance sheet as of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material
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Adverse Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied
with and are in compliance with all federal, state, local and foreign statutes
(civil and criminal), laws, ordinances, regulations, rules, notices, permits,
judgments, orders and decrees applicable to any of them or any of their
respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to protection of the air, water or land
or to the generation, storage, use, handling, transportation, treatment or
disposal of Solid Wastes, Hazardous Wastes or Hazardous Substances (as such
terms are defined in any applicable Environmental Law); (ii) the COMPANY and the
COMPANY's Subsidiaries have obtained and complied with all necessary permits and
other approvals necessary to treat, transport, store, dispose of or otherwise
handle Solid Wastes, Hazardous Wastes or Hazardous Substances and have reported,
to the extent required by all Environmental Laws, all past and present sites
owned and operated by the COMPANY or any of the COMPANY's Subsidiaries where
Solid Wastes, Hazardous Wastes or Hazardous Substances have been treated,
stored, used, disposed of or otherwise handled; (iii) there have been no
releases (as defined in Environmental Laws) at, from, under, in or on any
property owned or operated by the COMPANY or any of the COMPANY's Subsidiaries
except as permitted by Environmental Laws; (iv) to the knowledge of the COMPANY
there is no on-site or off-site location to which the COMPANY or any of the
COMPANY's Subsidiaries has transported or disposed of Solid Wastes, Hazardous
Wastes or Hazardous Substances or arranged for the transportation of Solid
Wastes, Hazardous Wastes or Hazardous Substances, which site is the subject of
any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the COMPANY, any of the
COMPANY's Subsidiaries or URSI for any clean-up cost, remedial work, damage to
natural resources or personal injury, including, but not limited to, any claim
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended; and (v) to the knowledge of the COMPANY the COMPANY has no
contingent liability in connection with any release of any Solid Waste,
Hazardous Waste or Hazardous Substance into the environment. Schedule 5.13 lists
all releases of Hazardous Wastes or Hazardous Substances by the COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500,
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including in the case of (z) true, complete and correct copies of all such
leases and including in cases (x), (y) and (z) an indication as to which real
and personal property is currently owned, or was formerly owned, by STOCKHOLDERS
or business or personal affiliates of the COMPANY or STOCKHOLDERS. Except as
shown on Schedule 5.14, all of the trucks and other material machinery and
equipment of the COMPANY and the COMPANY's Subsidiaries listed on Schedule 5.14
are in good working order and condition, ordinary wear and tear excepted. All
leases set forth on Schedule 5.14 are in full force and effect and constitute
valid and binding agreements on the COMPANY (or a COMPANY Subsidiary, as
applicable), and to the knowledge of the COMPANY, constitute valid and binding
agreements on the other parties thereto (and their successors) thereto in
accordance with their respective terms. All fixed assets used by the COMPANY and
the COMPANY's Subsidiaries that are material to the operation of their
respective businesses are either owned by the COMPANY or the COMPANY's
Subsidiaries or leased under an agreement indicated on Schedule 5.14. Schedule
5.14 shall, without limitation, contain true, complete and correct copies of all
title reports and title insurance policies received or owned by the COMPANY or
the COMPANY's Subsidiaries. The COMPANY has also provided in Schedule 5.14 a
summary description of all plans or projects which have been memorialized in any
written or electronic document or file and involves the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business, with respect to which the COMPANY (or any of the
COMPANY's Subsidiaries) has made any expenditure in the two-year period prior to
the date of the Agreement in excess of $10,000, or which if pursued by the
COMPANY (or such Subsidiary) would require additional expenditures of capital in
excess of $10,000. Except as set forth on Schedule 5.14 and except for liens
excepted in Section 7.3(vi)(1) and (3), there are no liens against the COMPANY's
properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds,
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mortgages, options to purchase land, leases, liens, pledges or other security
agreements) (a) as of the Balance Sheet Date and (b) entered into since the
Balance Sheet Date, and in each case has delivered true, complete and correct
copies of such agreements to URSI, except that leases set forth on Schedule 5.14
need not be set forth on Schedule 5.15. Except to the extent set forth on
Schedule 5.15, (i) none of the COMPANY's (including the COMPANY's Subsidiaries)
significant customers has cancelled or substantially reduced or, to the
knowledge of the COMPANY, is currently attempting or threatening to cancel any
Material Contract or substantially reduce utilization of the services provided
by the COMPANY (including the COMPANY's Subsidiaries), and (ii) the COMPANY and
the COMPANY's Subsidiaries have complied with all material commitments and
obligations pertaining to any Material Contract, and are not in default under
any such Material Contract, and no notice of default has been received, and no
Stockholder or any affiliate of any Stockholder is a party to any such Material
Contract. Except as set forth in Schedule 5.15, the COMPANY and the COMPANY's
Subsidiaries have not been the subject of any election in respect of union
representation of employees and are not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union. Except as set forth on Schedule 5.15, no employees of the
COMPANY or its Subsidiaries are represented by any labor union or covered by any
collective bargaining agreement and no campaign to establish such representation
has ever occurred or is in progress. There is no pending or, to the COMPANY's
knowledge, threatened labor dispute involving the COMPANY (including the
COMPANY's Subsidiaries) and any group of its employees, nor has the COMPANY
(including the COMPANY's Subsidiaries) experienced any labor interruptions over
the past three years, and the COMPANY considers its relationship with employees
to be good.
5.16 Intentionally Deleted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
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5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
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(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries
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(including, but not limited to, annual reports, summary annual reports,
actuarial reports, PBGC-1 Forms, audits or tax returns) have been timely filed
or distributed. None of: (i) the STOCKHOLDERS; (ii) any Plan; or (iii) the
COMPANY (including any of the COMPANY's Subsidiaries) has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No Plan has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and no
circumstances exist pursuant to which the COMPANY (including any of the
COMPANY's Subsidiaries) could have any direct or indirect liability whatsoever
(including being subject to any statutory lien to secure payment of any such
liability), to the PBGC under Title IV of ERISA or to the Internal Revenue
Service for any excise tax or penalty with respect to any plan now or
hereinafter maintained or contributed to by the COMPANY or any member of a
"controlled group" (as defined in Section 4001(a)(14) of ERISA) that includes
the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA
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and related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
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(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes,
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ordinances, orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
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any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the meaning of Section
168 of the Code. No Acquired Party is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986, or to any "long-term contract"
within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal
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income Tax Returns that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-
Closing Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of the transaction. Moreover, shares of
COMPANY Stock and shares of URSI Stock held by STOCKHOLDERS and otherwise sold,
redeemed, or disposed of on or after January 1, 1997, including after the
Closing Date, will be considered in making this representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
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(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any STOCKHOLDER-
employees of the COMPANY will be separate consideration for, or allocable to,
any of their shares of the COMPANY; none of the shares of URSI Stock received by
any STOCKHOLDER-employees in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
STOCKHOLDER-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not exceed 7.5% of
the aggregate consideration to be received by such STOCKHOLDERS pursuant to the
Merger.
(xxvi) The fair market value of the sum of (i) all dividends paid
and distributions made on or after January 1, 1997 and through the Closing Date
in respect of COMPANY Stock and (ii) all consideration paid by the COMPANY on or
after January 1, 1997 and through the Closing Date in connection with all direct
and indirect redemptions, purchases and other acquisitions of COMPANY Stock is
no greater than $1,000,000.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not
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have a Material Adverse Effect on the rights and benefits of the COMPANY
(including the COMPANY's Subsidiaries) under the Material Documents and (b)
except as set forth on Schedule 5.23, the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under any of the terms or provisions of the
Material Documents or the Charter Documents. Except as set forth on Schedule
5.23, none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party to any of the
transactions contemplated hereby to remain in full force and effect or give rise
to any right to termination, cancellation or acceleration or loss of any right
or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
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(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
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Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or
associated with the COMPANY for any failure of the Registration Statement to
become effective, or of the IPO to occur at a particular price or within a
particular range of prices or to occur at all; and (iii) the decision of
STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent to
the proposed Merger, has been made independent of, and without reliance upon,
any statements, opinions or other communications of, or due diligence
investigations which have been or will be made or performed by any prospective
Underwriter, relative to URSI or the prospective IPO. The Underwriters shall
have no obligation to the STOCKHOLDERS with respect to any disclosure contained
in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations
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and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.9 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that such representations and warranties as made on the
Closing Date shall survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
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not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
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(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly issued, fully paid and nonassessable. All of the shares of
URSI Stock issued to persons set forth on Annex III and, based on the
representations of STOCKHOLDERS contained in this Agreement and in the documents
delivered to URSI pursuant hereto, to STOCKHOLDERS pursuant to this Agreement,
were or will be offered, issued, sold and delivered by URSI in compliance with
all applicable state and federal laws concerning the issuance of securities and
none of such shares were or will be issued in violation of the preemptive rights
of any past or present stockholder. On the Closing Date the capitalization of
URSI will be as set forth in the Registration Statement.
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6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or contingent, other than those incurred in connection with
this Agreement, the Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state,
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municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. URSI (including URSI's Subsidiaries) has conducted and is conducting
its business in compliance with the requirements, standards, criteria and
conditions set forth in applicable Federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing which would have a URSI Material Adverse
Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
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(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-
employees of the COMPANY after the Merger will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of
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this Agreement or the due diligence investigations conducted with respect to the
Founding Companies other than the COMPANY as confidential in accordance with the
provisions of Section 14 hereof. In addition, URSI will cause each of the
Founding Companies other than the COMPANY to enter into a provision similar to
this Section 7.1 requiring each such Founding Company to keep confidential any
information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
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(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in
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connection with the acquisition of equipment with an aggregate cost not in
excess of $10,000 necessary or desirable for the conduct of the businesses of
the COMPANY (including the COMPANY's Subsidiaries), or (2) liens set forth on
Schedule 5.15 hereto or (3) liens for taxes either not yet due or materialmen's,
mechanics', workers', repairmen's, employees' or other like liens arising in the
ordinary course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely affect
the Tax liability of the Company or any Acquired Party (or URSI following the
Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
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(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be
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likely to cause any representation or warranty of the COMPANY or the
STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect
on or prior to the Closing Date and (ii) any material failure of any STOCKHOLDER
or the COMPANY to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by such person hereunder, provided no such notice
shall be required until the Pricing Date with respect to the occurrence in the
ordinary course of business of any event which would cause Schedules 5.10, 5.11
or 5.14 to be incorrect. URSI shall give prompt notice to the COMPANY of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of URSI contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing Date and (ii) any material failure of URSI to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 7.8 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.9, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre- Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre- Closing, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. In the event that the COMPANY amends or supplements
a Schedule pursuant to this Section 7.9, and URSI and a majority of the Founding
Companies do not consent to the effectiveness of such amendment or supplement at
or before the Pre-Closing, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. In the event that URSI amends or
supplements a Schedule pursuant to this Section 7.9 and COMPANY and a majority
of the Founding Companies do not consent to the effectiveness of such amendment
or supplement at or before the Pre-Closing, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.9. In the event that one of the other
Founding Companies amends or supplements a Schedule
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pursuant to Section 7.9 of one of the Other Agreements, URSI shall give the
COMPANY notice promptly after it has knowledge thereof. If URSI, COMPANY and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. For
purposes of this Section 7.9, URSI shall be deemed to have given its consent to
the effectiveness of any amendment or supplement to a Schedule if URSI does not
notify COMPANY of its disapproval within 48 hours after URSI is notified of such
amendment or supplement, and COMPANY and each other Founding Company shall be
deemed to have given its consent to the effectiveness of any amendment or
supplement to a Schedule if COMPANY or such other Founding Company, as
applicable, does not notify URSI of its disapproval within 48 hours after
COMPANY or such other Founding Company, as applicable, is notified of such
amendment or supplement. Except as otherwise provided herein, no amendment of or
supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
financial statements of the COMPANY for any quarter subsequent to December 31,
1997 are required to be included in the Registration Statement, the COMPANY
shall provide, and URSI shall have had sufficient time to review, the unaudited
balance sheet and statements of income, cash flows and retained earnings of the
COMPANY, as applicable, as of the end of such quarter, disclosing no Material
Adverse Change in the financial condition or results of operations of the
COMPANY. Such financial statements, which shall be deemed to be Financial
Statements (as described in Section 5.9), shall have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted therein). To the extent such
Financial Statements shall be included or reflected in the Registration
Statement, any events or
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circumstances reflected therein which might constitute a Material Adverse Effect
with respect to the COMPANY shall be deemed to have been waived by URSI and URSI
shall have no rights in respect of such Material Adverse Effect.
7.12 Lien Acceleration. In the event that Forrest J. Purdy, or any
assignee, successor or other person otherwise acting in the place of Forrest J.
Purdy, takes action to accelerate any obligation the payment of which is secured
by any assets or capital stock of the COMPANY or any Subsidiary, the
STOCKHOLDERS shall promptly pay Mr. Purdy, or such assignee, successor or other
person, in full and obtain from him or such person a release of all security
interests in any such assets or capital stock.
7.13 Repayment. Promptly after the Closing Date, URSI shall pay the
outstanding obligation due to Forrest J. Purdy (up to $1,562,530) as reflected
on Schedule 5.10, or if such obligation has been refinanced by the COMPANY and a
new obligation incurred for such purpose, such new obligation in an amount not
to exceed $1,562,530.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration
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Statement and the prospectus forming a part thereof, including any amendments
thereof or supplement thereto, shall not contain any untrue statement of a
material fact, or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that the condition contained in this sentence shall be deemed satisfied if (i)
URSI shall have made available to the COMPANY copies of each draft (or changed
pages of such draft) of the Registration Statement produced prior to the initial
filing with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
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amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
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8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock
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pursuant to the Registration Statement and no governmental agency or body shall
have taken any other action or made any request of URSI as a result of which the
management of URSI deems it inadvisable to proceed with the transactions
hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY for the fiscal quarters beginning after the Balance Sheet
Date, and the unaudited consolidated statement of income, cash flows and
retained earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no material adverse change in the financial
condition of the COMPANY or the results of its operations on a consolidated
basis from the financial statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Fabian &
Clendenin, counsel to the COMPANY and the STOCKHOLDERS, dated the Pricing Date,
in the form annexed hereto as Annex VI, and the Underwriters shall have received
a copy of the same opinion addressed to them.
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9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the COMPANY
shall have obtained and delivered to URSI such additional consents to the Merger
as URSI may reasonably request including, without limitation, URSI's receipt on
or prior to the Pricing Date of those licenses, franchises, permits or
governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS or entities listed on
Schedule 9.12(c) shall have entered into leases with URSI substantially in the
form attached as Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
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Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
9.16 Release and Payment. URSI shall receive a release in form acceptable
to it of the security interest of Forrest J. Purdy in the shares of City Towing,
Inc. City Towing, Inc. or the COMPANY shall have received the payments of
$742,619.34 of principal and $89,114.00 of interest due under that certain
Agreement to Pay Intercompany Indebtedness to which the COMPANY and City Towing,
Inc. and the Net Obligors defined therein are parties.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
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(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
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any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to period and (b) prepare
such Tax Returns in a manner consistent with prior years, in each case as
determined in the good faith judgment of the preparer of such returns; provided,
however, that in all events such Tax Returns shall be prepared in a manner
consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
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10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(b) "Interim Period" shall mean any taxable period commencing
prior to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period
that begins before the Closing Date and ends on or before the Closing Date and
(ii) the portion of any Interim Period through and including the Closing Date.
(d) "Post-Closing Period" means any taxable period that begins
after the Closing Date, and, with respect to any Interim Period, the portion of
such Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income,
gross receipts, ad valorem, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A), customs duties, capital stock, net worth, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, workers compensation, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government,
including any interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations,
claims for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, having or purporting to have jurisdiction with respect to
any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
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10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such guarantees on indebtedness
being assumed by URSI. URSI agrees to indemnify the STOCKHOLDERS against any and
all claims made by lenders under such guarantee which arise as a result of
URSI's failure to cause such guarantee to be released on or prior to the
Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify under Section 401(a) of the Code and makes contributions to such plan
at or above the level stated in Schedule 10.9, or (ii) in the case of each other
Plan, URSI establishes a replacement Plan providing equivalent or better
benefits, provided that if the cost of providing equivalent benefits should, in
the good faith judgment of URSI, become commercially unreasonable, the
replacement plan established by URSI may have benefits that are, in the good
faith judgment of URSI, as close to equivalent as can be obtained at
commercially reasonable cost. There are no intended third party beneficiaries of
this Section 10.9, and after the Closing Date it can be waived or modified by
URSI and STOCKHOLDERS (or their successors) shown as owning two-thirds of
COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except with respect to
Sections 5.30 through 5.32, which shall be several), will indemnify, defend,
protect and hold harmless URSI, the COMPANY and the Surviving Corporation at all
times from and after the date of this Agreement until the Expiration Date as
defined in Section 5 above, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by URSI, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in
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connection herewith (other than the representations and warranties provided in
Section 5.22, for which Section 11.6 provides special indemnity provisions);
(ii) any nonfulfillment of any agreement on the part of the STOCKHOLDERS or the
COMPANY under this Agreement; (iii) any liability under the 1933 Act, the 1934
Act or other Federal or state law or regulation, at common law or otherwise, (x)
arising out of or based upon any untrue statement of a material fact relating to
the COMPANY (including the COMPANY's Subsidiaries) or the STOCKHOLDERS that is
provided to URSI or its counsel by the COMPANY or the STOCKHOLDERS and contained
in any preliminary prospectus relating to the IPO, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or (y) arising out of or based upon any omission to state therein a
material fact relating to the COMPANY (including the COMPANY's Subsidiaries) or
the STOCKHOLDERS that is required to be stated therein or necessary to make the
statements therein not misleading, and not provided to URSI or its counsel by
the COMPANY or the STOCKHOLDERS, provided, however, that such indemnity shall
not inure to the benefit of URSI, the COMPANY or the Surviving Corporation to
the extent that such untrue statement (or alleged untrue statement) was made in,
or omission (or alleged omission) occurred in, any preliminary prospectus and
the STOCKHOLDERS provided, in writing, corrected information to URSI counsel and
to URSI for inclusion in the final prospectus, and such information was not so
included; or (iv) any costs, fees, judgments or amounts paid in settlement or
contribution in respect of any claim arising from that certain automobile
accident described in the last paragraph of Schedule 5.17, to the extent that
the aggregate of such costs, fees, judgments and amounts paid is not paid by the
COMPANY's insurer.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement
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of a material fact relating to URSI or any of the Founding Companies other than
the COMPANY contained in any preliminary prospectus, the Registration Statement
or any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to URSI or any of the Founding Companies
other than the COMPANY that is required to be stated therein or necessary to
make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if such
counsel shall have a conflict of interest that prevents such counsel from
representing Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing and Indemnifying
Party will reimburse the Indemnified Party for the expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to
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accept a final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person claim
shall be limited to the amount so offered in settlement by said Third Person and
the Indemnified Party shall reimburse the Indemnifying Party for any additional
costs of defense which it subsequently incurs with respect to such claim and all
additional costs of settlement or judgment. If the Indemnifying Party does not
undertake to defend such matter as to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. All settlements hereunder
shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for any Tax benefits, Tax detriments or insurance proceeds in
determining the amount of any indemnification obligation under this Section,
provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy. All indemnification payments
under this Section shall be deemed adjustments to the Merger consideration
provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement unless this Agreement is terminated prior to the Closing
Date, in
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which event the Indemnification Threshold is an amount equal to two percent (2%)
of the Minimum Value set forth in Annex I. All such amounts otherwise payable by
one or more STOCKHOLDERS in excess of the amount so offset and reduced shall be
paid without offset or reduction pursuant to this Section 11.5(i). This Section
11.5(i) shall not apply to amounts payable pursuant to Section 11.6. For
purposes of determining the Indemnification Threshold, the URSI Stock shall be
valued at the initial price of the URSI Stock sold to the public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no event shall any STOCKHOLDER be
liable under this Agreement, including this Section 11, to pay more than
one-half the amount of the proceeds received by such STOCKHOLDER pursuant to
this Agreement, calculated as provided in Section 11.5(iv), with respect to
Specially Limited Claims. Specially Limited Claims are all claims that may be
made pursuant to this Agreement, including this Section 11, except claims based
on (a) breach of representations and warranties in Section 5.13, (b) breach of
representations and warranties in Section 5.19 or Section 5.20 or (c) Section
11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the amount of proceeds received by such
STOCKHOLDER pursuant to this Agreement. The amount of proceeds received by each
STOCKHOLDER shall be calculated (for purposes of Section 11.5(iii) and this
Section 11.5(iv)) by adding (a) the cash
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proceeds paid to such STOCKHOLDER pursuant to Section 2.2 hereof prior to the
date that the indemnity obligation of such STOCKHOLDER is paid, plus (b) the net
proceeds to such STOCKHOLDER from the sale of such STOCKHOLDER's URSI Stock
received pursuant to Section 2.2 hereof prior to the date that the indemnity
obligation of such STOCKHOLDER is paid, plus (c) the Fair Market Value (as
defined in Annex I) of the unsold shares of URSI Stock received by such
STOCKHOLDER pursuant to Section 2.2 prior to the date that the indemnity
obligation of such STOCKHOLDER is paid, valued on the trading day prior to the
day the indemnification obligation is paid.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first been
provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and
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all Taxes (including without limitation any obligation to contribute to the
payment of, or be entitled to share in the refund of, a Tax determined on a
consolidated, combined or unitary basis with respect to a group of corporations
that includes or included the COMPANY or any Acquired Party) which are (i)
imposed on any member (other than the COMPANY or any Acquired Party) of the
consolidated, unitary or combined group which includes or included the COMPANY
or any Acquired Party or (ii) imposed on the COMPANY or any Acquired Party in
respect of its income, business, property or operations or for which the COMPANY
or any Acquired Party may otherwise be liable (A) for any Pre-Closing Period,
(B) resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to any items of income or gain of an
entity treated as a partnership reported by the COMPANY or any Acquired Party as
a partner, to the extent such items are properly attributable to periods of the
"partnership" ending on or before the Closing Date, or (G) attributable to any
discharge of indebtedness that may result from any capital contributions by
STOCKHOLDERS (or an affiliate of STOCKHOLDERS) to the COMPANY or any Acquired
Party of any intercompany indebtedness owed by COMPANY to any STOCKHOLDER (or an
affiliate of any STOCKHOLDER), but, in each case, only to the extent such Taxes
or the entitlement to such refund are not reflected on the applicable Company
Financial Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv), Section 5.22(xxv) or Section 5.22(xxvi) and (y)
any liability imposed on URSI, the COMPANY and any Acquired Party (or any
affiliate of such companies) attributable to any breach of a warranty or
representation made by STOCKHOLDERS in Section 5.22, excluding Section 5.22(xx),
Section 5.22(xxiv), Section 5.22(xxv) and Section 5.22(xxvi).
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(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party with respect to any
Post-Closing Period and (y) any liability imposed on STOCKHOLDERS attributable
to any breach of a warranty or representation made by URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
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11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
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11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre- Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
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obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or
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selling products or services in direct competition with URSI within the
Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the
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operation of which, under such circumstances, does not violate clause (i) of
this Section 13, and in any event such new business, activities or location are
not in violation of this Section 13 or of such STOCKHOLDER's obligations under
this Section 13, if any, such STOCKHOLDER shall not be chargeable with a
violation of this Section 13 if URSI and/or any subsidiary thereof shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against URSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
URSI of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in this Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto, except that upon URSI's admission in
writing, or a final judicial determination which is not the subject of appeal or
further appeal by URSI, that URSI has materially breached a STOCKHOLDER's
Employment Agreement (if applicable), right to have URSI Stock registered under
the 1933 Act pursuant to Section 17.1 or 17.2, or right to receive contingent
consideration as provided in section C of Annex I, and URSI's failure to cure
such material breach within 30 days of such admission or final judicial
determination, whichever is applicable, then the covenants contained in this
Section 13 with respect to such STOCKHOLDER will expire. The covenants contained
in this Section 13 shall have no effect if the transactions contemplated by this
Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
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14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under color of law, provided that prior
to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS
shall, if possible, give prior written notice thereof to URSI and provide URSI
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this section,
URSI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting URSI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS
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with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. Upon termination of this
Agreement prior to the Closing Date for any reason other than the material
breach or default of any STOCKHOLDER or COMPANY, URSI will return to COMPANY all
documents containing confidential information of COMPANY that were provided to
URSI by COMPANY or STOCKHOLDERS and all summaries, abstractions, projections,
pro formas or like material prepared by URSI incorporating such confidential
information. In the event of a breach or threatened breach by URSI of the
provisions of this section, the COMPANY and the STOCKHOLDERS shall be entitled
to an injunction restraining URSI from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANY and the STOCKHOLDERS from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to
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Section 3 of this Agreement will bear a legend substantially in the form set
forth below and containing such other information as URSI may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel) by the terms
and conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which a majority of the interests therein by
value is owned by the STOCKHOLDER and members of the STOCKHOLDER's family, and
(y) which is and continues to be controlled by the STOCKHOLDER and members of
the STOCKHOLDER'S family for the period set forth in Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
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16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests,
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provided that URSI shall have the right to reduce the number of shares included
in such registration to the extent that inclusion of such shares could, in the
opinion of tax counsel to URSI or its independent auditors, jeopardize the
status of the transactions contemplated hereby and by the Registration Statement
as a reorganization described in Section 368(a)(1)(A) of the Code. In addition,
if URSI is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 17.1 that the number of shares to be
sold by persons other than URSI is greater than the number of such shares which
can be offered without adversely affecting the offering, URSI may reduce the
number of shares offered for the accounts of such persons to a number deemed
satisfactory by such managing underwriter, provided that such reduction shall be
made first by reducing the number of shares to be sold by persons other than
URSI, the stockholders named on Annex III hereto, the stockholders of the
Founding Companies, and any person or persons who have required such
registration pursuant to "demand" registration rights granted by URSI;
thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of URSI Stock owned by such stockholder
immediately after the Closing, provided that if any stockholder does not wish to
sell all shares such stockholder is permitted to sell, the opportunity to sell
additional shares shall be reallocated in the same manner to those stockholders
named in Annex III hereto and stockholders of the Founding Companies who wish to
sell more shares until no more shares can be sold by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as
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practicable, file and use its best efforts to cause to become effective a
registration statement covering all such shares. URSI will use its best efforts
to keep such Demand Registration current and effective for one hundred twenty
(120) days (or such shorter period during which holders shall have sold all URSI
Stock which they requested to be registered). URSI shall be obligated to effect
only two (2) Demand Registrations for all Founding Stockholders, and the second
request may not be made until at least one (1) year after the effective date of
the registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER may request in writing
that URSI file a registration statement under the 1933 Act requesting such
number of such STOCKHOLDER's shares of URSI Stock as is required to be sold to
pay the difference between the cash proceeds and the amount of the
indemnification obligation, plus legal and other expenses, including expenses of
the offering, provided arrangements are made to URSI's reasonable satisfaction
that the proceeds will be used solely for the purpose of such indemnification
and the payment of related expenses and that arrangements are made to the
reasonable satisfaction of URSI that the proceeds of such sale will be used
solely for the purpose of such indemnification and the payment of related
expenses, and that no such request may be made until after one hundred eighty
(180) days following the Closing Date without the consent of the managing
underwriter.
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17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the Pre-
Closing and Closing Date until December 31, 2001.
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18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be modified or amended only by a written instrument
executed by the STOCKHOLDERS, the COMPANY and URSI, acting through their
respective officers, duly authorized by their respective Boards of Directors.
Any disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all
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loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the STOCKHOLDERS and incurred
prior to the Pricing Date may be paid from COMPANY funds rather than from
personal funds of the STOCKHOLDERS, provided that the STOCKHOLDERS provide to
URSI, prior to the Pricing Date, a detailed statement setting forth the type and
amount of all such fees, expenses or disbursements so paid, and, provided
further, that the aggregate amount of same shall be deducted, on a
dollar-for-dollar basis, from the amount of cash into which the COMPANY Stock
shall be converted pursuant to Section 2.2 hereof. Notwithstanding the foregoing
provisions of Section 18.6, URSI shall further pay or reimburse reasonable costs
of counsel or co- counsel for the Company if and to the extent so mutually
agreed in advance between URSI and such counsel, in circumstances where URSI
believes it obtained or may have obtained a material benefit, in light of market
conditions and other factors, by reason of such counsel or co-counsel expediting
the transaction which is the subject of this Agreement and reducing the time
required to complete this Agreement and the Other Agreements.
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18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
Smith-Christensen Enterprises, Inc.
2201 N. Commerce Street
North Las Vegas, NV 89030
Attn: Edward Smith, President
and marked "Personal and Confidential" with copies to:
Fabian & Clendenin
215 South State Street, 12th Floor
Salt Lake City, UT 84111
Attn: David Lyon
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery
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will be effective upon actual receipt by the party or an officer, general
partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the Nevada
state court of general jurisdiction in Clark County, Nevada (or, if there is
federal jurisdiction, then the exclusive jurisdiction and venue of the United
States District Court having jurisdiction over Clark County). The parties hereby
consent to the personal and exclusive jurisdiction and venue of said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
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either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
_____________________________ By_______________________________________
Name:
Title:
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WITNESS: STOCKHOLDERS:
_____________________________ _________________________________________
Gregory J. Smith
_____________________________ _________________________________________
Melanie S. Larkin
_____________________________ _________________________________________
Brandon D. Smith
_____________________________ _________________________________________
Edward D. Smith
_____________________________ _________________________________________
Vern J. Christensen
_____________________________ _________________________________________
David J. Christensen
_____________________________ _________________________________________
Paul L. Christensen
_____________________________ _________________________________________
Joan C. Baldwin
_____________________________ _________________________________________
Thomas F. Christensen
_____________________________ _________________________________________
Eldon Lee Thomson
_____________________________ _________________________________________
Julia C. Smith
_____________________________ _________________________________________
Karen Slade
_____________________________ Smith-Christensen Enterprises, Inc.
By_______________________________________
Name:
Title:
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ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
SMITH-CHRISTENSEN ENTERPRISES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $5,129,000 in cash.
2. 485,750 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $10,958,000.
4. STOCKHOLDERS and the COMPANY will not be obligated to
consummate the Merger if the aggregate value of cash and URSI Stock (valued at
the IPO initial public offering price) is less than the Minimum Value of
$10,229,375.
B. Fixed consideration to be paid to each STOCKHOLDER:
Stockholder Shares of Common
Stock of URSI Cash
Gregory J. Smith 70,433 $743,705
Melanie S. Larkin 70,433 743,705
Brandon D. Smith 70,433 743,705
Edward D. Smith 38,860 410,310
Vern J. Christensen 41,289 435,965
David J. Christensen 52,946 559,601
Paul L. Christensen 52,946 559,061
Joan C. Baldwin 26,230 276,966
Thomas F. Christensen 17,487 184,644
Eldon Lee Thomson 17,487 184,644
Julia C. Smith 13,601 143,617
Karen Slade 13,601 143,617
TOTALS: 485,750 $5,129,000
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 1 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 1 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 1 Payout Date.
b. Five percent (5%) of Year 1 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
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c. Five percent (5%) of Year 1 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
d. Five percent (5%) of Year 1 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
e. Five percent (5%) of Year 1 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 2 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 2 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 2 Payout Date.
b. Five percent (5%) of Year 2 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
c. Five percent (5%) of Year 2 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
d. Five percent (5%) of Year 2 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 3 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 3 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 3 Payout Date.
b. Five percent (5%) of Year 3 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
c. Five percent (5%) of Year 3 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
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4. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 4 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 4 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 4 Payout Date.
b. Five percent (5%) of Year 4 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 5 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 5 Excess Revenues will be paid
to STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the revenues reported by
URSI for a fiscal year that are generated by operations acquired by URSI by
means of the Merger, provided that revenues reported by URSI for fiscal year
1998 will be adjusted to reflect revenues of COMPANY from January 1, 1998 until
the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year
1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year
1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year
2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year
2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year
2002.
g. "Year 1 Target Revenues" means $7,482,721.
h. "Year 2 Target Revenues" means the greater of (i) 110% of
Year 1 Actual Revenues or (ii) 110% of Year 1 Target Revenues.
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i. "Year 3 Target Revenues" means the greater of (i) 110% of
Year 2 Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of
Year 3 Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of
Year 4 Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of
Year 1 Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues
are equal to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are
zero.
m. "Year 2 Excess Revenues" means the excess, if any, of
Year 2 Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues
are equal to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are
zero.
n. "Year 3 Excess Revenues" means the excess, if any, of
Year 3 Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues
are equal to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are
zero.
o. "Year 4 Excess Revenues" means the excess, if any, of
Year 4 Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues
are equal to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are
zero.
p. "Year 5 Excess Revenues" means the excess, if any, of
Year 5 Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues
are equal to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are
zero.
q. "Year 1 Payout Date" means thirty days (30) days after
URSI announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI
announces its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2000.
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t. "Year 4 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues,
including without limitation decisions regarding the allocation and non-
allocation of capital and other resources, decisions regarding business that
will be accepted or rejected, personnel decisions including decisions to lay off
employees, and decisions to shut down or downsize operations, all without making
any offsetting adjustments to Revenues or contingent consideration, provided
only that such decisions are made in a good faith effort to maximize total
return to the shareholders of URSI to the extent that the same can be realized
without undue risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired
by URSI by means of the Merger are sold, a reasonable adjustment will be made to
these provisions so that the contingent consideration paid to STOCKHOLDERS will
be approximately the same as it would have been if the fiscal year had not been
changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock,
without interest (even though interest may be imputed for purposes such as
income taxes).
10. For purposes of determining the number of shares of URSI Stock
to be paid as contingent consideration, URSI Stock will be valued at Fair Market
Value as of the trading day the day before the contingent consideration is paid.
"Fair Market Value" of the URSI Stock as of a date means the market price per
share of such Shares determined by the Board of Directors of URSI as follows:
(a) if the URSI Stock is traded on a stock exchange on the date in question,
then the Fair Market Value will be equal to the closing price reported by the
applicable composite-transactions report for such date; (b) if the URSI Stock is
traded over-the-counter on the date in question and is classified as a national
market issue, then the Fair Market Value will be equal to the last- transaction
price quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
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11. Despite anything to the contrary in this Annex I or elsewhere
in the Agreement, the total number of shares of URSI Stock issued to
STOCKHOLDERS as contingent consideration will not exceed the total number of
shares of URSI Stock issued to STOCKHOLDERS as fixed consideration, and
contingent consideration will be reduced to the extent (if any) necessary so
that this limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration
or the number of shares of URSI Stock to be paid will be finally determined by
the independent certified public accountants engaged by URSI to audit the
financial statements of URSI for its most recently completed fiscal year.
13. The right to be paid contingent consideration is personal and
cannot be assigned by any STOCKHOLDER without the consent of URSI except upon
the death of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon
any STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
Gregory J. Smith 14.5%
Melanie S. Larkin 14.5%
Brandon D. Smith 14.5%
Edward D. Smith 8.0%
Vern J. Christensen 8.5%
David J. Christensen 11.0%
Paul L. Christensen 11.0%
Joan C. Baldwin 5.0%
Thomas F. Christensen 3.5%
Eldon Lee Thomson 3.5%
Julia C. Smith 3.0%
Karen Slade 3.0%
----
Total: 100%
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Part II
Aggregate fixed consideration to be paid to the stockholders of each
Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,850 50% 50%
Keystone Towing,
Inc. 377,624 50% 50%
Northland Auto
Transporters, Inc. 588,435 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 182,571 41% 59%
Total Shares 2,294,143
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<PAGE>
EXHIBIT 2.5
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
CARON AUTO WORKS, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of
Directors of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 3
2.1 Manner of Conversion 3
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES 4
4. PRE-CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 8
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 10
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and
Commitments 13
5.16 Intentionally Omitted 14
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5.17 Insurance 14
5.18 Compensation; Employment Agreements 14
5.19 Employee Plans 14
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 19
5.23 No Violations 23
5.24 Government Contracts 23
5.25 Absence of Changes 23
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 25
5.28 Relations with Governments 25
5.29 Disclosure 25
(B) Representations and Warranties of STOCKHOLDERS 26
5.30 Authority; Ownership 26
5.31 Preemptive Rights 26
5.32 No Intention to Dispose of URSI Stock 26
6. REPRESENTATIONS OF URSI 26
6.1 Due Organization 27
6.2 URSI Stock 27
6.3 Validity of Obligations 27
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI STOCK 28
6.7 No Side Agreements 29
6.8 Subsidiaries 29
6.9 Business; Real Property; Material Agreements;
Financial Information 29
6.10 Conformity with Law 30
6.11 No Violations 30
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 32
7.3 Prohibited Activities 33
7.4 No Shop 35
7.5 Notice to Bargaining Agents 35
7.6 Termination of Plans 35
7.7 URSI Prohibited Activities 35
7.8 Notification of Certain Matters 36
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7.9 Amendment of Schedules 36
7.10 Cooperation in Preparation of Registration Statement 37
7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY 38
8.1 Representations and Warranties; Performance
of Obligations 38
8.2 Satisfaction 38
8.3 No Litigation 39
8.4 Stockholders' Release 39
8.5 Opinion of Counsel 39
8.6 Director Indemnification 40
8.7 Registration Statement 40
8.8 Consents and Approvals 40
8.9 Good Standing Certificates 40
8.10 No Waivers 40
8.11 No Material Adverse Change 40
8.12 Transfer Restrictions 41
8.13 Employment Agreements, Consulting Agreements,
Leases and Cosale Agreement 41
8.14 Tax Opinion 41
8.15 CABI Closing 41
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 41
9.1 Representations and Warranties; Performance
of Obligations 41
9.2 No Litigation 41
9.3 Examination of Final Financial Statements 42
9.4 No Material Adverse Effect 42
9.5 STOCKHOLDERS' Release 42
9.6 Satisfaction 42
9.7 Termination of Related Party Agreements 42
9.8 Opinion of Counsel 42
9.9 Consents and Approvals 43
9.10 Good Standing Certificates 43
9.11 Registration Statement 43
9.12 Employment Agreements, Consulting Agreements
and Leases 43
9.13 Repayment of Indebtedness 43
9.14 FIRPTA Certificate 44
9.15 Insurance 44
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9.16 Releases 44
10. POST-CLOSING COVENANTS 44
10.1 Preservation of Tax and Accounting Treatment 44
10.2 Disclosure 45
10.3 Cooperation in Tax Return Preparation 45
10.4 Tax Return Preparation and Filing 45
10.5 Reorganization Status Information Reporting 46
10.6 Special Definitions Related to Tax Matters 46
10.7 Directors 47
10.8 Release from Guarantees 47
10.9 Preservation of Plans 48
11. INDEMNIFICATION 48
11.1 General Indemnification by the STOCKHOLDERS 48
11.2 Indemnification by URSI 49
11.3 Third Person Claims 49
11.4 Exclusive Remedy 51
11.5 Limitations on Indemnification 51
11.6 Special Tax Indemnity Provisions 53
11.7 Special Contest Rights Related to Tax Matters 55
11.8 Special Notification Requirements Regarding
Tax Disputes 56
11.9 Refunds 56
11.10 Optional Payment With Shares 56
12. TERMINATION OF AGREEMENT 56
12.1 Termination 56
12.2 Liabilities in Event of Termination 57
12.3 Use of Financial Statements 57
13. NONCOMPETITION 58
13.1 Prohibited Activities 58
13.2 Damages 59
13.3 Reasonable Restraint 59
13.4 Severability; Reformation 59
13.5 Independent Covenant 59
13.6 Materiality 60
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 60
14.1 STOCKHOLDERS 60
14.2 URSI 61
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Page
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14.3 Damages 61
14.4 Survival 62
15. TRANSFER RESTRICTIONS 62
15.1 Transfer Restrictions 62
15.2 Permitted Transferees 62
16. FEDERAL SECURITIES ACT REPRESENTATIONS 63
16.1 Compliance with Law 63
16.2 Accredited Investors; Economic Risk; Sophistication 63
17. REGISTRATION RIGHTS 64
17.1 Piggyback Registration Rights 64
17.2 Demand Registration Rights 65
17.3 Registration Procedures 66
17.4 Underwriting Agreement 66
17.5 URSI Stock 67
17.6 Availability of Rule 144 67
17.7 Survival 67
18. GENERAL 67
18.1 Cooperation 67
18.2 Successors and Assigns 67
18.3 Entire Agreement 67
18.4 Counterparts 68
18.5 Brokers and Agents 68
18.6 Expenses 68
18.7 Notices 69
18.8 Governing Law; Forum 70
18.9 Survival of Representations and Warranties 70
18.10 Exercise of Rights and Remedies 70
18.11 Time 71
18.12 Reformation and Severability 71
18.13 Remedies Cumulative 71
18.14 Captions 71
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<PAGE>
SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
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Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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<PAGE>
TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
CABI 5.1
CABI Agreement 5.11
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
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Material Contracts 5.15
Material Documents 5.23
Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), CARON AUTO WORKS, INC., a Connecticut corporation
(the "COMPANY"), and the stockholders listed on Annex II (the "STOCKHOLDERS").
The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., ASC Transportation Services, Caron Auto Brokers, Inc.,
Falcon Towing and Auto Delivery, Inc., Keystone Towing, Inc., Northland Auto
Transporters, Inc., Northland Fleet Leasing Company, Silver State Tow &
Recovery, Inc. and Smith-Christensen Enterprises, Inc. (the "Other Companies")
in order to acquire additional vehicle towing and transport companies (the Other
Companies, together with the COMPANY, are collectively referred to herein as the
"Founding Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
State of the State of Delaware and, if required, the Articles of Merger or a
similar document to be signed, verified and filed with the relevant authorities
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<PAGE>
in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 5,000 shares of no par value common stock, ("COMPANY
Stock"), of which 100 shares are issued and outstanding; and
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(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
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(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of URSI Stock and the
amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as
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set forth in Section 2.2, notwithstanding the number of shares of COMPANY Stock
such certificates represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of URSI
Stock, and the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger, shall occur and be deemed to be completed. If so
requested by any STOCKHOLDER at or prior to the Pre-Closing, URSI will use its
best efforts to cause all cash to be paid to such STOCKHOLDER on the CLOSING
DATE to be paid by the Underwriters (as defined in Section 5.29) by initiating a
wire transfer payment pursuant to instructions included in STOCKHOLDER's
request. After the Pre-Closing and until the Closing Date, no party may
withdraw, terminate or rescind any
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delivery made at the Pre-Closing unless this Agreement is terminated as provided
in Section 12. All documents delivered at the Pre-Closing shall be held by
Howard Rice for final delivery on the Closing Date as directed by the parties
and their counsel at the Pre-Closing, provided only that the Articles of Merger
and any similar document may be filed to become effective on the Closing Date.
Should the Agreement be terminated as provided in Section 12 prior to the
Closing Date, the parties shall take all steps necessary to rescind any such
filings, Howard Rice shall return all documents delivered at the Pre-Closing to
the parties who delivered the same, all such deliveries at the Pre-Closing will
be rescinded and a nullity, the Merger shall not become effective, the shares of
COMPANY Stock will not be converted into URSI Stock, and shares of URSI Stock
will not be delivered to STOCKHOLDERS. The documents delivered at Pre-Closing
shall include documents required to rescind, prior to the Closing Date, any
filing of the Articles of Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
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5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and Caron Auto Brokers, Inc., a Connecticut corporation ("CABI")
and the COMPANY's and CABI's Subsidiaries, taken as a whole (a "Material Adverse
Effect"). Schedule 5.1 contains a list of all jurisdictions in which the COMPANY
is authorized or qualified to do business. True, complete and correct copies of
the Certificate of Incorporation and Bylaws, each as amended, of the COMPANY and
each of the COMPANY's Subsidiaries (collectively, the "Charter Documents"),
certified by the Secretary or Assistant Secretary of the COMPANY, are all
attached hereto as Schedule 5.1. A true, complete and correct copy of each
Certificate of Incorporation included in the Charter Documents, certified by the
Secretary of State or other appropriate authority of the state of incorporation
of the COMPANY or the applicable Subsidiary of the COMPANY, as applicable, shall
be delivered to URSI at the Pre-Closing. Except as set forth on Schedule 5.1,
the minute books of the COMPANY and each of the COMPANY's Subsidiaries, as
heretofore made available to URSI, are correct and complete in all material
respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind. All
of the issued and outstanding shares of the capital stock of the COMPANY have
been duly authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the STOCKHOLDERS and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder.
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5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY
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("Affiliates") other than in the ordinary course of business, within the
preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the combined Balance Sheet of the COMPANY and CABI as of September 30,
1997 and 1996 and the related combined Statements of Operations, Cash Flows and
Retained Earnings for each of the years in the three-year period ended September
30, 1997 (September 30, 1997 being hereinafter referred to as the "Balance Sheet
Date"). Such Financial Statements have been prepared in accordance with KPMG
Peat Marwick LLP's interpretation of generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as
noted). Except as set forth on Schedule 5.9, such Balance Sheets as of September
30, 1997 and 1996 present fairly the combined financial position of the COMPANY
and CABI (and each of the COMPANY's Subsidiaries on a consolidated basis) as of
the dates indicated thereon, and such Statements of Operations, Cash Flows and
Retained Earnings present fairly the results of their combined respective
operations for the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance
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with generally accepted accounting principles consistently applied if such
balance sheet were being prepared immediately prior to Closing or if such
liabilities represent liabilities of the nature described in Section 5.13,
Section 5.20 and/or Section 5.22 (excluding items subject to any knowledge
qualifications contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the
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amount shown on Schedule 5.11, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or
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Hazardous Substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the COMPANY
or any of the COMPANY's Subsidiaries where Solid Wastes, Hazardous Wastes or
Hazardous Substances have been treated, stored, used, disposed of or otherwise
handled; (iii) there have been no releases (as defined in Environmental Laws)
at, from, under, in or on any property owned or operated by the COMPANY or any
of the COMPANY's Subsidiaries except as permitted by Environmental Laws; (iv) to
the knowledge of the COMPANY there is no on-site or off-site location to which
the COMPANY or any of the COMPANY's Subsidiaries has transported or disposed of
Solid Wastes, Hazardous Wastes or Hazardous Substances or arranged for the
transportation of Solid Wastes, Hazardous Wastes or Hazardous Substances, which
site is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
any of the COMPANY's Subsidiaries or URSI for any clean-up cost, remedial work,
damage to natural resources or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) to the knowledge of the COMPANY the
COMPANY has no contingent liability in connection with any release of any Solid
Waste, Hazardous Waste or Hazardous Substance into the environment. Schedule
5.13 lists all releases of Hazardous Wastes or Hazardous Substances by the
COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500, including in the case of
(z) true, complete and correct copies of all such leases and including in cases
(x), (y) and (z) an indication as to which real and personal property is
currently owned, or was formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as shown on Schedule 5.14, all
of the trucks and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedule 5.14 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.14 are in full force and effect and constitute valid and binding agreements on
the COMPANY (or a COMPANY Subsidiary, as applicable), and to the knowledge of
the COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their respective
terms. All fixed assets used by the COMPANY and the COMPANY's Subsidiaries that
are material to the
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operation of their respective businesses are either owned by the COMPANY or the
COMPANY's Subsidiaries or leased under an agreement indicated on Schedule 5.14.
Schedule 5.14 shall, without limitation, contain true, complete and correct
copies of all title reports and title insurance policies received or owned by
the COMPANY or the COMPANY's Subsidiaries. The COMPANY has also provided in
Schedule 5.14 a summary description of all plans or projects which have been
memorialized in any written or electronic document or file and involves the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, with respect to which the
COMPANY (or any of the COMPANY's Subsidiaries) has made any expenditure in the
two-year period prior to the date of the Agreement in excess of $10,000, or
which if pursued by the COMPANY (or such Subsidiary) would require additional
expenditures of capital in excess of $10,000. Except as set forth on Schedule
5.14 and except for liens excepted in Section 7.3(vi)(1) and (3), there are no
liens against the COMPANY's properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
leases, liens, pledges or other security agreements) (a) as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to URSI, except
that leases set forth on Schedule 5.14 need not be set forth on Schedule 5.15.
Except to the extent set forth on Schedule 5.15, (i) none of the COMPANY's
(including the COMPANY's Subsidiaries) significant customers has cancelled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel any Material Contract or substantially
reduce utilization of the services provided by the COMPANY (including the
COMPANY's Subsidiaries), and (ii) the COMPANY and the COMPANY's Subsidiaries
have complied with all material commitments and obligations pertaining to any
Material Contract, and are not in default under any such Material Contract, and
no notice of default has been received, and no Stockholder or any affiliate of
any Stockholder is a party to any such Material Contract. Except as set
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forth in Schedule 5.15, the COMPANY and the COMPANY's Subsidiaries have not been
the subject of any election in respect of union representation of employees and
are not bound by or subject to (and none of its respective assets or properties
is bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.15, no employees of the COMPANY or its Subsidiaries are
represented by any labor union or covered by any collective bargaining agreement
and no campaign to establish such representation has ever occurred or is in
progress. There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries) and any
group of its employees, nor has the COMPANY (including the COMPANY's
Subsidiaries) experienced any labor interruptions over the past three years, and
the COMPANY considers its relationship with employees to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
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plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
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(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any
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withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
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(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
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(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect
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timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the
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meaning of Section 168 of the Code. No Acquired Party is a party to any "safe
harbor lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to
any "long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-Closing
Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of
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the transaction. Moreover, shares of COMPANY Stock and shares of URSI Stock held
by STOCKHOLDERS and otherwise sold, redeemed, or disposed of on or after January
1, 1997, including after the Closing Date, will be considered in making this
representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any
STOCKHOLDER-employees of the COMPANY will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not
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exceed 7.5% of the aggregate consideration to be received by such STOCKHOLDERS
pursuant to the Merger.
(xxvi) Intentionally Omitted.
(xxvii) Intentionally Omitted.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
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(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
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5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the
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STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, or of the IPO to
occur at a particular price or within a particular range of prices or to occur
at all; and (iii) the decision of STOCKHOLDERS to enter into this Agreement, or
to vote in favor of or consent to the proposed Merger, has been made independent
of, and without reliance upon, any statements, opinions or other communications
of, or due diligence investigations which have been or will be made or performed
by any prospective Underwriter, relative to URSI or the prospective IPO. The
Underwriters shall have no obligation to the STOCKHOLDERS with respect to any
disclosure contained in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
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be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
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6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly
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issued, fully paid and nonassessable. All of the shares of URSI Stock issued to
persons set forth on Annex III and, based on the representations of STOCKHOLDERS
contained in this Agreement and in the documents delivered to URSI pursuant
hereto, to STOCKHOLDERS pursuant to this Agreement, were or will be offered,
issued, sold and delivered by URSI in compliance with all applicable state and
federal laws concerning the issuance of securities and none of such shares were
or will be issued in violation of the preemptive rights of any past or present
stockholder. On the Closing Date the capitalization of URSI will be as set forth
in the Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or
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contingent, other than those incurred in connection with this Agreement, the
Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. URSI (including URSI's Subsidiaries)
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a URSI Material Adverse Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
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6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY after the Merger will be separate consideration for, or allocable
to, any of their shares of the COMPANY; none of the shares of URSI Stock
received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
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7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Founding Companies other than the COMPANY as confidential in
accordance with the provisions of Section 14 hereof. In addition, URSI will
cause each of the Founding Companies other than the COMPANY to enter into a
provision similar to this Section 7.1 requiring each such Founding Company to
keep confidential any information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
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(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3,
between the date of this Agreement and the Closing Date, the COMPANY has not
and, without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
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make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely
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affect the Tax liability of the Company or any Acquired Party (or URSI following
the Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
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(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-
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Closing, unless such Schedule is to be amended to reflect an event occurring
other than in the ordinary course of business. In the event that the COMPANY
amends or supplements a Schedule pursuant to this Section 7.9, and URSI and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In
the event that URSI amends or supplements a Schedule pursuant to this Section
7.9 and COMPANY and a majority of the Founding Companies do not consent to the
effectiveness of such amendment or supplement at or before the Pre-Closing, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 7.9. In the event
that one of the other Founding Companies amends or supplements a Schedule
pursuant to Section 7.9 of one of the Other Agreements, URSI shall give the
COMPANY notice promptly after it has knowledge thereof. If URSI, COMPANY and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. For
purposes of this Section 7.9, URSI shall be deemed to have given its consent to
the effectiveness of any amendment or supplement to a Schedule if URSI does not
notify COMPANY of its disapproval within 48 hours after URSI is notified of such
amendment or supplement, and COMPANY and each other Founding Company shall be
deemed to have given its consent to the effectiveness of any amendment or
supplement to a Schedule if COMPANY or such other Founding Company, as
applicable, does not notify URSI of its disapproval within 48 hours after
COMPANY or such other Founding Company, as applicable, is notified of such
amendment or supplement. Except as otherwise provided herein, no amendment of or
supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the
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STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
combined financial statements of the COMPANY and CABI for any quarter subsequent
to December 31, 1997 are required to be included in the Registration Statement,
the COMPANY shall provide, and URSI shall have had sufficient time to review,
the unaudited combined balance sheet and statements of income, cash flows and
retained earnings of the COMPANY and CABI as of the end of such quarter,
disclosing no Material Adverse Change in the combined financial condition or
results of operations of the COMPANY and CABI. Such financial statements, which
shall be deemed to be Financial Statements (as described in Section 5.9), shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). To the extent such Financial Statements shall be included or reflected
in the Registration Statement, any events or circumstances reflected therein
which might constitute a Material Adverse Effect with respect to the COMPANY and
CABI shall be deemed to have been waived by URSI and URSI shall have no rights
in respect of such Material Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
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legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced prior to the initial filing
with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
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8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
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8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
8.15 CABI Closing. CABI shall be acquired by URSI on the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
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restrain or prohibit the Merger or the offering and sale by URSI of URSI Stock
pursuant to the Registration Statement and no governmental agency or body shall
have taken any other action or made any request of URSI as a result of which the
management of URSI deems it inadvisable to proceed with the transactions
hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY and CABI for the fiscal quarters beginning after the
Balance Sheet Date, and the unaudited consolidated combined statement of income,
cash flows and retained earnings of the COMPANY and CABI for the fiscal quarters
beginning after the Balance Sheet Date, disclosing no material adverse change in
the financial condition of the COMPANY and CABI or the results of their
operations from the financial statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Dwyer
Sheridan & Fitzgerald, counsel to the COMPANY and the STOCKHOLDERS, dated the
Pricing Date, in the form annexed hereto as Annex VI, and the Underwriters shall
have received a copy of the same opinion addressed to them.
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9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the COMPANY
shall have obtained and delivered to URSI such additional consents to the Merger
as URSI may reasonably request including, without limitation, URSI's receipt on
or prior to the Pricing Date of those licenses, franchises, permits or
governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
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9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
9.16 Releases. The Company shall have been released from its obligations
as guarantor of those mortgage obligations described in Schedule 5.10 of which
David A. Caron and 359 Burnham Street LLC are the obligors, or received
assurances reasonably acceptable to URSI that URSI, as the successor to the
Company, will be released from such obligations promptly following the Closing
Date.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
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(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
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(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to period and (b) prepare
such Tax Returns in a manner consistent with prior years, in each case as
determined in the good faith judgment of the preparer of such returns; provided,
however, that in all events such Tax Returns shall be prepared in a manner
consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or entity
that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
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(b) "Interim Period" shall mean any taxable period commencing prior
to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period that
begins before the Closing Date and ends on or before the Closing Date and (ii)
the portion of any Interim Period through and including the Closing Date.
(d) "Post-Closing Period" means any taxable period that begins after
the Closing Date, and, with respect to any Interim Period, the portion of such
Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income, gross
receipts, ad valorem, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A), customs duties, capital stock, net worth, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
workers compensation, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever imposed by any federal, state, local or foreign government
or any agency or political subdivision of any such government, including any
interest, penalty, or addition thereto, without regard to whether such tax is
disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations, claims
for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction, having or purporting to have jurisdiction with respect to any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such guarantees on indebtedness
being assumed by URSI. URSI agrees to indemnify the STOCKHOLDERS against any and
all claims made by lenders under such guarantee which arise as a result of
URSI's failure to cause such guarantee to be released on or prior to the
Closing.
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10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify under Section 401(a) of the Code and makes contributions to such plan
at or above the level stated in Schedule 10.9, or (ii) in the case of each other
Plan, URSI establishes a replacement Plan providing equivalent or better
benefits, provided that if the cost of providing equivalent benefits should, in
the good faith judgment of URSI, become commercially unreasonable, the
replacement plan established by URSI may have benefits that are, in the good
faith judgment of URSI, as close to equivalent as can be obtained at
commercially reasonable cost. There are no intended third party beneficiaries of
this Section 10.9, and after the Closing Date it can be waived or modified by
URSI and STOCKHOLDERS (or their successors) shown as owning two-thirds of
COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except with respect to
Sections 5.30 through 5.32, which shall be several), will indemnify, defend,
protect and hold harmless URSI, the COMPANY and the Surviving Corporation at all
times from and after the date of this Agreement until the Expiration Date as
defined in Section 5 above, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by URSI, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith (other than the
representations and warranties provided in Section 5.22, for which Section 11.6
provides special indemnity provisions); (ii) any nonfulfillment of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, (x) arising out of or based upon any
untrue statement of a material fact relating to the COMPANY (including the
COMPANY's Subsidiaries) or the STOCKHOLDERS that is provided to URSI or its
counsel by the COMPANY or the STOCKHOLDERS and contained in any preliminary
prospectus relating to the IPO, the Registration Statement or any prospectus
forming a part
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thereof, or any amendment thereof or supplement thereto, or (y) arising out of
or based upon any omission to state therein a material fact relating to the
COMPANY (including the COMPANY's Subsidiaries) or the STOCKHOLDERS that is
required to be stated therein or necessary to make the statements therein not
misleading, and not provided to URSI or its counsel by the COMPANY or the
STOCKHOLDERS, provided, however, that such indemnity shall not inure to the
benefit of URSI, the COMPANY or the Surviving Corporation to the extent that
such untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS
provided, in writing, corrected information to URSI counsel and to URSI for
inclusion in the final prospectus, and such information was not so included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"),
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give the Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall state the nature and the basis of
such claim and a reasonable estimate of the amount thereof. The Indemnifying
Party shall have the right to defend and settle, at its own expense and by its
own counsel, any such matter so long as the Indemnifying Party pursues the same
in good faith and diligently, provided that the Indemnifying Party shall not
settle any criminal proceeding without the consent of the Indemnified Party. If
the Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by Indemnifying Party,
provided that if such counsel shall have a conflict of interest that prevents
such counsel from representing Indemnified Party, Indemnified Party shall have
the right to participate in such matter through counsel of its own choosing and
Indemnifying Party will reimburse the Indemnified Party for the expenses of its
counsel. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a final
and complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim and all additional costs
of settlement or judgment. If the Indemnifying Party does not undertake to
defend such matter as to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim
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without the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for any Tax benefits, Tax detriments or insurance proceeds in
determining the amount of any indemnification obligation under this Section,
provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy. All indemnification payments
under this Section shall be deemed adjustments to the Merger consideration
provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement plus the aggregate value of the consideration paid to the
stockholders of CABI pursuant to Section 2.2 of the Agreement and Plan of
Reorganization among URSI, CABI and the stockholders of CABI ("CABI Agreement")
unless this Agreement is terminated prior to the Closing Date, in which event
the Indemnification Threshold is an amount equal to two percent (2%) of the
Minimum Value set forth in Annex I. All such amounts otherwise payable by one or
more STOCKHOLDERS in excess of the amount so offset and reduced shall be paid
without offset or reduction pursuant to this Section 11.5(i). This Section
11.5(i) shall not apply to amounts payable pursuant to Section 11.6. For
purposes of determining the Indemnification Threshold, the URSI Stock shall be
valued at the initial price of the URSI Stock sold to the public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction
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pursuant to this Section 11.5(ii). This Section 11.5(ii) shall not apply to
amounts payable pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no event shall any STOCKHOLDER be
liable under this Agreement, including this Section 11, and the CABI Agreement
to pay more than one-half the amount of the proceeds received by such
STOCKHOLDER pursuant to this Agreement, and the CABI Agreement calculated as
provided in Section 11.5(iv), with respect to Specially Limited Claims and
"Specially Limited Claims" as such term is defined in the CABI Agreement.
Specially Limited Claims are all claims that may be made pursuant to this
Agreement, including this Section 11, and the CABI Agreement except claims based
on (a) breach of representations and warranties in Section 5.13, (b) breach of
representations and warranties in Section 5.19 or Section 5.20 or (c) Section
11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the amount of proceeds received by such
STOCKHOLDER pursuant to this Agreement and the CABI Agreement. The amount of
proceeds received by each STOCKHOLDER pursuant to this Agreement shall be
calculated (for purposes of Section 11.5(iii) and this Section 11.5(iv)) by
adding (a) the cash proceeds paid to such STOCKHOLDER pursuant to Section 2.2
hereof prior to the date that the indemnity obligation of such STOCKHOLDER is
paid, plus (b) the net proceeds to such STOCKHOLDER from the sale of such
STOCKHOLDER's URSI Stock received pursuant to Section 2.2 hereof prior to the
date that the indemnity obligation of such STOCKHOLDER is paid, plus (c) the
Fair Market Value (as defined in Annex I) of the unsold shares of URSI Stock
received by such STOCKHOLDER pursuant to Section 2.2 prior to the date that the
indemnity obligation of such STOCKHOLDER is paid, valued on the trading day
prior to the day the indemnification obligation is paid. The amount of proceeds
received by a STOCKHOLDER under the CABI agreement shall be determined as set
forth in Section 11.5(iv) thereof.
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(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first been
provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and all Taxes
(including without limitation any obligation to contribute to the payment of, or
be entitled to share in the refund of, a Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that includes
or included the COMPANY or any Acquired Party) which are (i) imposed on any
member (other than the COMPANY or any Acquired Party) of the consolidated,
unitary or combined group which includes or included the COMPANY or any Acquired
Party or (ii) imposed on the COMPANY or any Acquired Party in respect of its
income, business, property or operations or for which the COMPANY or any
Acquired Party may otherwise be liable (A) for any Pre-Closing Period, (B)
resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section
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1.1502-6 or any analogous state, local or foreign law or regulation or by reason
of the COMPANY or any Acquired Party having been a member of any consolidated,
combined or unitary group on or prior to the Closing Date, (C) resulting from
the COMPANY or any Acquired Party ceasing to be a member of any affiliated group
(within the meaning of Section 1504(a) of the Code), (D) in respect of any
Post-Closing Period, attributable to events, transactions, sales, deposits,
services or rentals occurring, received or performed in a Pre-Closing Period,
(E) in respect of any Post-Closing Period, attributable to any change in
accounting method employed by the COMPANY or any Acquired Party during any of
the four previous taxable years, (F) in respect of any Post-Closing Period,
attributable to any items of income or gain of an entity treated as a
partnership reported by the COMPANY or any Acquired Party as a partner, to the
extent such items are properly attributable to periods of the "partnership"
ending on or before the Closing Date, or (G) attributable to any discharge of
indebtedness that may result from any capital contributions by STOCKHOLDERS (or
an affiliate of STOCKHOLDERS) to the COMPANY or any Acquired Party of any
intercompany indebtedness owed by COMPANY to any STOCKHOLDER (or an affiliate of
any STOCKHOLDER), but, in each case, only to the extent such Taxes or the
entitlement to such refund are not reflected on the applicable Company Financial
Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv) or Section 5.22(xxv) and (y) any liability imposed
on URSI, the COMPANY and any Acquired Party (or any affiliate of such companies)
attributable to any breach of a warranty or representation made by STOCKHOLDERS
in Section 5.22, excluding Section 5.22(xx), Section 5.22(xxiv) and Section
5.22(xxv).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party with respect to any
Post-Closing Period and (y) any liability imposed on STOCKHOLDERS attributable
to any breach of a warranty or representation made by URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
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reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent
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shall not be unreasonably withheld or delayed. In addition, (i) URSI shall keep
the STOCKHOLDERS duly informed of any proceedings in connection with an Interim
Period and (ii) the STOCKHOLDERS shall be entitled to receive copies of all
correspondence and documents relating to such proceedings and may, at their
option, observe such proceedings (including any associated meetings or
conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
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(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre-Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's
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proposed transaction with the COMPANY and the Other Companies as contemplated by
this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
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Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations under this
Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of
this Section 13 if URSI and/or any subsidiary thereof shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any
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STOCKHOLDER against URSI (including the subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by URSI of such covenants. It is specifically agreed that the period
of five (5) years stated at the beginning of this Section 13, during which the
agreements and covenants of each STOCKHOLDER made in this Section 13 shall be
effective, shall be computed by excluding from such computation any time during
which such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in this Section 13 shall not be affected by any breach of
any other provision hereof by any party hereto, except that upon URSI's
admission in writing, or a final judicial determination which is not the subject
of appeal or further appeal by URSI, that URSI has materially breached a
STOCKHOLDER's Employment Agreement (if applicable), right to have URSI Stock
registered under the 1933 Act pursuant to Section 17.1 or 17.2, or right to
receive contingent consideration as provided in section C of Annex I, and URSI's
failure to cure such material breach within 30 days of such admission or final
judicial determination, whichever is applicable, then the covenants contained in
this Section 13 with respect to such STOCKHOLDER will expire. The covenants
contained in this Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under color of law, provided that prior
to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS
shall, if possible, give prior written notice thereof to URSI and provide URSI
with the opportunity to contest such disclosure, or (iii) the disclosing party
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reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this section,
URSI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting URSI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. Upon termination of this Agreement prior to the Closing Date
for any reason other than the material breach or default of any STOCKHOLDER or
COMPANY, URSI will return to COMPANY all documents containing confidential
information of COMPANY that were provided to URSI by COMPANY or STOCKHOLDERS and
all summaries, abstractions, projections, pro formas or like material prepared
by URSI incorporating such confidential information. In the event of a breach or
threatened breach by URSI of the provisions of this section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining URSI from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree
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that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as URSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel)
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by the terms and conditions of this Agreement with respect to any further
transfer of such shares: (a) any family member of a STOCKHOLDER (including,
without limitation, any transfer to a custodian under any gift to minors
statute), with family members being defined as any spouse, lineal descendant or
ancestor of a STOCKHOLDER), (b) any trust which is for the benefit of one or
more family members of a STOCKHOLDER and (c) any corporation, partnership,
limited liability company or other entity (x) of which a majority of the
interests therein by value is owned by the STOCKHOLDER and members of the
STOCKHOLDER's family, and (y) which is and continues to be controlled by the
STOCKHOLDER and members of the STOCKHOLDER'S family for the period set forth in
Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits
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and risks of the proposed investment in the URSI Stock. The STOCKHOLDERS or
their respective purchaser representatives have had an adequate opportunity to
ask questions and receive answers from the officers of URSI concerning any and
all matters relating to the transactions described herein including, without
limitation, the background and experience of the current and proposed officers
and directors of URSI, the plans for the operations of the business of URSI, the
business, operations and financial condition of the Founding Companies other
than the COMPANY, and any plans for additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests, provided that URSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to URSI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a reorganization described in Section 368(a)(1)(A)
of the Code. In addition, if URSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than URSI is greater than the number of
such shares which can be offered without adversely affecting the offering, URSI
may reduce the number of shares offered for the accounts of such persons to a
number deemed satisfactory by such managing underwriter, provided that such
reduction shall be made first by reducing the number of shares to be sold by
persons other than URSI, the stockholders named on Annex III hereto, the
stockholders of the Founding Companies, and any person or persons who have
required such registration pursuant to "demand" registration rights granted by
URSI; thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of
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URSI Stock owned by such stockholder immediately after the Closing, provided
that if any stockholder does not wish to sell all shares such stockholder is
permitted to sell, the opportunity to sell additional shares shall be
reallocated in the same manner to those stockholders named in Annex III hereto
and stockholders of the Founding Companies who wish to sell more shares until no
more shares can be sold by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
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<PAGE>
In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER may request in writing
that URSI file a registration statement under the 1933 Act requesting such
number of such STOCKHOLDER's shares of URSI Stock as is required to be sold to
pay the difference between the cash proceeds and the amount of the
indemnification obligation, plus legal and other expenses, including expenses of
the offering, provided arrangements are made to URSI's reasonable satisfaction
that the proceeds will be used solely for the purpose of such indemnification
and the payment of related expenses and that arrangements are made to the
reasonable satisfaction of URSI that the proceeds of such sale will be used
solely for the purpose of such indemnification and the payment of related
expenses, and that no such request may be made until after one hundred eighty
(180) days following the Closing Date without the consent of the managing
underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by
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such requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the
Pre-Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the
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STOCKHOLDERS, the COMPANY and URSI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms. Except as otherwise stated herein,
this Agreement and the Annexes hereto may be modified or amended only by a
written instrument executed by the STOCKHOLDERS, the COMPANY and URSI, acting
through their respective officers, duly authorized by their respective Boards of
Directors. Any disclosure made on any Schedule delivered pursuant hereto shall
be deemed to have been disclosed for purposes of any other Schedule required
hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the
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STOCKHOLDERS and incurred prior to the Pricing Date may be paid from COMPANY
funds rather than from personal funds of the STOCKHOLDERS, provided that the
STOCKHOLDERS provide to URSI, prior to the Pricing Date, a detailed statement
setting forth the type and amount of all such fees, expenses or disbursements so
paid, and, provided further, that the aggregate amount of same shall be
deducted, on a dollar-for-dollar basis, from the amount of cash into which the
COMPANY Stock shall be converted pursuant to Section 2.2 hereof. Notwithstanding
the foregoing provisions of Section 18.6, URSI shall further pay or reimburse
reasonable costs of counsel or co-counsel for the Company if and to the extent
so mutually agreed in advance between URSI and such counsel, in circumstances
where URSI believes it obtained or may have obtained a material benefit, in
light of market conditions and other factors, by reason of such counsel or
co-counsel expediting the transaction which is the subject of this Agreement and
reducing the time required to complete this Agreement and the Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
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<PAGE>
Caron Auto Works, Inc.
359 Burnham
East Hartford, CT 06108
Attn: David A. Caron
and marked "Personal and Confidential" with copies to:
Thomas Sheridan, Esq.
Dwyer Sheridan & Fitzgerald
Box 537
Glastonbury, CT 06033
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the state
court of general jurisdiction in Hartford County (or, if there is federal
jurisdiction, then the exclusive jurisdiction and venue of the United States
District Court having jurisdiction over Hartford County). The parties hereby
consent to the personal and exclusive jurisdiction and venue of said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
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accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
By
- ----------------------------------- -----------------------------------
Name:
Title:
WITNESS: STOCKHOLDERS:
- ----------------------------------- -------------------------------------
David A. Caron
- ----------------------------------- -------------------------------------
Richard J. Caron
- ----------------------------------- -------------------------------------
Barbara B. Caron
WITNESS: CARON AUTO WORKS, INC.
By
- ----------------------------------- -----------------------------------
Name:
Title:
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<PAGE>
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
CARON AUTO WORKS, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $1,500,000 in cash.
2. 125,000 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $3,000,000.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate
the Merger if the aggregate value of cash and URSI Stock (valued at the IPO
initial public offering price) is less than the Minimum Value of $2,812,500.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
David A. Caron 112,500 $1,350,000
Richard J. Caron 6,250 75,000
Barbara B. Caron 6,250 75,000
------- ----------
TOTALS: 125,000 $1,500,000
<PAGE>
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 1 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 1 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 1 Payout Date.
b. Two and one-half percent (2.5%) of Year 1 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 1 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
d. Two and one-half percent (2.5%) of Year 1 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
e. Two and one-half percent (2.5%) of Year 1 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 2 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 2 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 2 Payout Date.
b. Two and one-half percent (2.5%) of Year 2 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3
Actual Revenues are equal to or greater than Year 2 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 2 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4
Actual Revenues are equal to or greater than Year 2 Actual Revenues.
<PAGE>
d. Two and one-half percent (2.5%) of Year 2 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 3 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 3 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 3 Payout Date.
b. Two and one-half percent (2.5%) of Year 3 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4
Actual Revenues are equal to or greater than Year 3 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 3 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 3 Actual Revenues.
4. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 4 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 4 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 4 Payout Date.
b. Two and one-half percent (2.5%) of Year 4 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5
Actual Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 5 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 5 Excess Revenues will be
paid to STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the aggregate revenues reported
by URSI for a fiscal year that are generated by operations acquired by
<PAGE>
URSI by means of the Merger and operations acquired by URSI by means of the
Merger transaction described in that certain Agreement and Plan of
Reorganization between URSI, David A. Caron and Caron Auto Brokers, Inc. (the
"CAB Merger"), provided that revenues reported by URSI for fiscal year 1998 will
be adjusted to reflect revenues of COMPANY and Caron Auto Brokers, Inc. from
January 1, 1998 until the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year 1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year 1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year 2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year 2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year 2002.
g. "Year 1 Target Revenues" means $7,200,000.
h. "Year 2 Target Revenues" means the greater of (i) 110% of Year 1
Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of Year 2
Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of Year 3
Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of Year 4
Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year 1
Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are equal
to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year 2
Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are equal
to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are zero.
<PAGE>
n. "Year 3 Excess Revenues" means the excess, if any, of Year 3
Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are equal
to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year 4
Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are equal
to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year 5
Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are equal
to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI announces
its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2000.
t. "Year 4 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues, including
without limitation decisions regarding the allocation and non-allocation of
capital and other resources, decisions regarding business that will be accepted
or rejected, personnel decisions including decisions to lay off employees, and
decisions to shut down or downsize operations, all without making any offsetting
adjustments to Revenues or contingent consideration, provided only that such
decisions are made in a good faith effort to maximize total return to the
shareholders of URSI to the extent that the same can be realized without undue
risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired by URSI by
means of the Merger or the CAB Merger are sold, a reasonable adjustment will be
made to these provisions so that the contingent consideration paid to
STOCKHOLDERS will be approximately the same as it
<PAGE>
would have been if the fiscal year had not been changed or the sale had not been
made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock to be
paid as contingent consideration, URSI Stock will be valued at Fair Market Value
as of the trading day the day before the contingent consideration is paid. "Fair
Market Value" of the URSI Stock as of a date means the market price per share of
such Shares determined by the Board of Directors of URSI as follows: (a) if the
URSI Stock is traded on a stock exchange on the date in question, then the Fair
Market Value will be equal to the closing price reported by the applicable
composite-transactions report for such date; (b) if the URSI Stock is traded
over-the-counter on the date in question and is classified as a national market
issue, then the Fair Market Value will be equal to the last-transaction price
quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
11. Despite anything to the contrary in this Annex I or elsewhere in the
Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS as
contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or the
number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
13. The right to be paid contingent consideration is personal and cannot
be assigned by any STOCKHOLDER without the consent of URSI except upon the death
of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon any
STOCKHOLDER being or remaining employed by URSI.
<PAGE>
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
David A. Caron 90%
Richard J. Caron 5%
Barbara B. Caron 5%
---
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of each Other
Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,850 50% 50%
Keystone Towing 377,624 50% 50%
Northland Auto
Transporters, Inc. 588,435 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,628,365
<PAGE>
EXHIBIT 2.6
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
CARON AUTO BROKERS, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
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1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of
Directors of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 3
2.1 Manner of Conversion 3
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES 4
4. PRE-CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 8
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 10
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
5.18 Compensation; Employment Agreements 14
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5.19 Employee Plans 14
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 19
5.23 No Violations 23
5.24 Government Contracts 23
5.25 Absence of Changes 23
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 25
5.28 Relations with Governments 25
5.29 Disclosure 25
(B) Representations and Warranties of STOCKHOLDERS 26
5.30 Authority; Ownership 26
5.31 Preemptive Rights 26
5.32 No Intention to Dispose of URSI Stock 26
6. REPRESENTATIONS OF URSI 26
6.1 Due Organization 27
6.2 URSI Stock 27
6.3 Validity of Obligations 27
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI STOCK 28
6.7 No Side Agreements 29
6.8 Subsidiaries 29
6.9 Business; Real Property; Material Agreements; Financial
Information 29
6.10 Conformity with Law 30
6.11 No Violations 30
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 32
7.3 Prohibited Activities 33
7.4 No Shop 35
7.5 Notice to Bargaining Agents 35
7.6 Termination of Plans 35
7.7 URSI Prohibited Activities 35
7.8 Notification of Certain Matters 36
7.9 Amendment of Schedules 36
7.10 Cooperation in Preparation of Registration Statement 37
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Page
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7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY 38
8.1 Representations and Warranties; Performance of
Obligations 38
8.2 Satisfaction 38
8.3 No Litigation 39
8.4 Stockholders' Release 39
8.5 Opinion of Counsel 39
8.6 Director Indemnification 40
8.7 Registration Statement 40
8.8 Consents and Approvals 40
8.9 Good Standing Certificates 40
8.10 No Waivers 40
8.11 No Material Adverse Change 40
8.12 Transfer Restrictions 41
8.13 Employment Agreements, Consulting Agreements,
Leases and Cosale Agreement 41
8.14 Tax Opinion 41
8.15 CAWI Closing 41
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 41
9.1 Representations and Warranties; Performance of
Obligations 41
9.2 No Litigation 42
9.3 Examination of Final Financial Statements 42
9.4 No Material Adverse Effect 42
9.5 STOCKHOLDERS' Release 42
9.6 Satisfaction 42
9.7 Termination of Related Party Agreements 42
9.8 Opinion of Counsel 42
9.9 Consents and Approvals 43
9.10 Good Standing Certificates 43
9.11 Registration Statement 43
9.12 Employment Agreements, Consulting Agreements and
Leases 43
9.13 Repayment of Indebtedness 44
9.14 FIRPTA Certificate 44
9.15 Insurance 44
9.16 Releases 44
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Page
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10. POST-CLOSING COVENANTS 44
10.1 Preservation of Tax and Accounting Treatment 44
10.2 Disclosure 45
10.3 Cooperation in Tax Return Preparation 45
10.4 Tax Return Preparation and Filing 45
10.5 Reorganization Status Information Reporting 46
10.6 Special Definitions Related to Tax Matters 46
10.7 Directors 47
10.8 Release from Guarantees 47
10.9 Preservation of Plans 48
11. INDEMNIFICATION 48
11.1 General Indemnification by the STOCKHOLDERS 48
11.2 Indemnification by URSI 49
11.3 Third Person Claims 50
11.4 Exclusive Remedy 51
11.5 Limitations on Indemnification 51
11.6 Special Tax Indemnity Provisions 53
11.7 Special Contest Rights Related to Tax Matters 55
11.8 Special Notification Requirements Regarding Tax
Disputes 56
11.9 Refunds 56
11.10 Optional Payment With Shares 56
12. TERMINATION OF AGREEMENT 57
12.1 Termination 57
12.2 Liabilities in Event of Termination 57
12.3 Use of Financial Statements 57
13. NONCOMPETITION 58
13.1 Prohibited Activities 58
13.2 Damages 59
13.3 Reasonable Restraint 59
13.4 Severability; Reformation 59
13.5 Independent Covenant 60
13.6 Materiality 60
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 60
14.1 STOCKHOLDERS 60
14.2 URSI 61
14.3 Damages 62
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Page
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14.4 Survival 62
15. TRANSFER RESTRICTIONS 62
15.1 Transfer Restrictions 62
16. FEDERAL SECURITIES ACT REPRESENTATIONS 63
16.1 Compliance with Law 63
16.2 Accredited Investors; Economic Risk; Sophistication 64
17. REGISTRATION RIGHTS 64
17.1 Piggyback Registration Rights 64
17.2 Demand Registration Rights 65
17.3 Registration Procedures 66
17.4 Underwriting Agreement 67
17.5 URSI Stock 67
17.6 Availability of Rule 144 67
17.7 Survival 67
18. GENERAL 67
18.1 Cooperation 67
18.2 Successors and Assigns 68
18.3 Entire Agreement 68
18.4 Counterparts 68
18.5 Brokers and Agents 68
18.6 Expenses 68
18.7 Notices 69
18.8 Governing Law; Forum 70
18.9 Survival of Representations and Warranties 71
18.10 Exercise of Rights and Remedies 71
18.11 Time 71
18.12 Reformation and Severability 71
18.13 Remedies Cumulative 71
18.14 Captions 71
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SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
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Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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<PAGE>
TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
CAWI 5.1
CAWI Agreement 11.5
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
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Material Contracts 5.15
Material Documents 5.23
Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), CARON AUTO BROKERS, INC., a Connecticut
corporation (the "COMPANY"), and the stockholders listed on Annex II (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., ASC Transportation Services, Caron Auto Works, Inc., Falcon
Towing and Auto Delivery, Inc., Keystone Towing, Northland Auto Transporters,
Inc., Northland Fleet Leasing Company, Silver State Tow & Recovery, Inc. and
Smith-Christensen Enterprises, Inc. (the "Other Companies") in order to acquire
additional vehicle towing and transport companies (the Other Companies, together
with the COMPANY, are collectively referred to herein as the "Founding
Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
State of the State of Delaware and, if required, the Articles of Merger or a
similar document to be signed, verified and filed with the relevant authorities
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<PAGE>
in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 5,000 shares of common stock with a par value of
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$10, ("COMPANY Stock"), of which 100 shares are issued and outstanding; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
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As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of URSI Stock and the
amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash
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which such STOCKHOLDER is entitled to receive as a result of the Merger, as set
forth in Section 2.2, notwithstanding the number of shares of COMPANY Stock such
certificates represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of URSI
Stock, and the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger, shall occur and be deemed to be completed. If so
requested by any STOCKHOLDER at or prior to the Pre-Closing, URSI will use its
best efforts to cause all cash to be paid to such STOCKHOLDER on the CLOSING
DATE to be paid by the Underwriters (as defined in Section 5.29) by initiating a
wire transfer payment pursuant to instructions included in STOCKHOLDER's
request. After the Pre-Closing and
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until the Closing Date, no party may withdraw, terminate or rescind any delivery
made at the Pre-Closing unless this Agreement is terminated as provided in
Section 12. All documents delivered at the Pre-Closing shall be held by Howard
Rice for final delivery on the Closing Date as directed by the parties and their
counsel at the Pre-Closing, provided only that the Articles of Merger and any
similar document may be filed to become effective on the Closing Date. Should
the Agreement be terminated as provided in Section 12 prior to the Closing Date,
the parties shall take all steps necessary to rescind any such filings, Howard
Rice shall return all documents delivered at the Pre-Closing to the parties who
delivered the same, all such deliveries at the Pre-Closing will be rescinded and
a nullity, the Merger shall not become effective, the shares of COMPANY Stock
will not be converted into URSI Stock, and shares of URSI Stock will not be
delivered to STOCKHOLDERS. The documents delivered at Pre-Closing shall include
documents required to rescind, prior to the Closing Date, any filing of the
Articles of Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
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5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and Caron Auto Works, Inc., a Connecticut corporation ("CAWI"),
and the COMPANY's and CAWI's Subsidiaries, taken as a whole (a "Material Adverse
Effect"). Schedule 5.1 contains a list of all jurisdictions in which the COMPANY
is authorized or qualified to do business. True, complete and correct copies of
the Certificate of Incorporation and Bylaws, each as amended, of the COMPANY and
each of the COMPANY's Subsidiaries (collectively, the "Charter Documents"),
certified by the Secretary or Assistant Secretary of the COMPANY, are all
attached hereto as Schedule 5.1. A true, complete and correct copy of each
Certificate of Incorporation included in the Charter Documents, certified by the
Secretary of State or other appropriate authority of the state of incorporation
of the COMPANY or the applicable Subsidiary of the COMPANY, as applicable, shall
be delivered to URSI at the Pre-Closing. Except as set forth on Schedule 5.1,
the minute books of the COMPANY and each of the COMPANY's Subsidiaries, as
heretofore made available to URSI, are correct and complete in all material
respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind. All
of the issued and outstanding shares of the capital stock of the COMPANY have
been duly authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the STOCKHOLDERS and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder.
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5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY
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("Affiliates") other than in the ordinary course of business, within the
preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the combined Balance Sheet of the Company and CAWI as of September 30,
1997 and 1996 and the related combined Statements of Operations, Cash Flows and
Retained Earnings for each of the years in the three-year period ended September
30, 1997 (September 30, 1997 being hereinafter referred to as the "Balance Sheet
Date"). Such Financial Statements have been prepared in accordance with KPMG
Peat Marwick LLP's interpretation of generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as
noted). Except as set forth on Schedule 5.9, such Balance Sheets as of September
30, 1997 and 1996 present fairly the combined financial position of the COMPANY
and CAWI (and each of the COMPANY's Subsidiaries on a consolidated basis) as of
the dates indicated thereon, and such Statements of Operations, Cash Flows and
Retained Earnings present fairly the results of their combined operations for
the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance
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with generally accepted accounting principles consistently applied if such
balance sheet were being prepared immediately prior to Closing or if such
liabilities represent liabilities of the nature described in Section 5.13,
Section 5.20 and/or Section 5.22 (excluding items subject to any knowledge
qualifications contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the
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amount shown on Schedule 5.11, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or
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Hazardous Substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the COMPANY
or any of the COMPANY's Subsidiaries where Solid Wastes, Hazardous Wastes or
Hazardous Substances have been treated, stored, used, disposed of or otherwise
handled; (iii) there have been no releases (as defined in Environmental Laws)
at, from, under, in or on any property owned or operated by the COMPANY or any
of the COMPANY's Subsidiaries except as permitted by Environmental Laws; (iv) to
the knowledge of the COMPANY there is no on-site or off-site location to which
the COMPANY or any of the COMPANY's Subsidiaries has transported or disposed of
Solid Wastes, Hazardous Wastes or Hazardous Substances or arranged for the
transportation of Solid Wastes, Hazardous Wastes or Hazardous Substances, which
site is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
any of the COMPANY's Subsidiaries or URSI for any clean-up cost, remedial work,
damage to natural resources or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) to the knowledge of the COMPANY the
COMPANY has no contingent liability in connection with any release of any Solid
Waste, Hazardous Waste or Hazardous Substance into the environment. Schedule
5.13 lists all releases of Hazardous Wastes or Hazardous Substances by the
COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500, including in the case of
(z) true, complete and correct copies of all such leases and including in cases
(x), (y) and (z) an indication as to which real and personal property is
currently owned, or was formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as shown on Schedule 5.14, all
of the trucks and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedule 5.14 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.14 are in full force and effect and constitute valid and binding agreements on
the COMPANY (or a COMPANY Subsidiary, as applicable), and to the knowledge of
the COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their respective
terms. All fixed assets used by the COMPANY and the COMPANY's Subsidiaries that
are material to the
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operation of their respective businesses are either owned by the COMPANY or the
COMPANY's Subsidiaries or leased under an agreement indicated on Schedule 5.14.
Schedule 5.14 shall, without limitation, contain true, complete and correct
copies of all title reports and title insurance policies received or owned by
the COMPANY or the COMPANY's Subsidiaries. The COMPANY has also provided in
Schedule 5.14 a summary description of all plans or projects which have been
memorialized in any written or electronic document or file and involves the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, with respect to which the
COMPANY (or any of the COMPANY's Subsidiaries) has made any expenditure in the
two-year period prior to the date of the Agreement in excess of $10,000, or
which if pursued by the COMPANY (or such Subsidiary) would require additional
expenditures of capital in excess of $10,000. Except as set forth on Schedule
5.14 and except for liens excepted in Section 7.3(vi)(1) and (3), there are no
liens against the COMPANY's properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
leases, liens, pledges or other security agreements) (a) as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to URSI, except
that leases set forth on Schedule 5.14 need not be set forth on Schedule 5.15.
Except to the extent set forth on Schedule 5.15, (i) none of the COMPANY's
(including the COMPANY's Subsidiaries) significant customers has cancelled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel any Material Contract or substantially
reduce utilization of the services provided by the COMPANY (including the
COMPANY's Subsidiaries), and (ii) the COMPANY and the COMPANY's Subsidiaries
have complied with all material commitments and obligations pertaining to any
Material Contract, and are not in default under any such Material Contract, and
no notice of default has been received, and no Stockholder or any affiliate of
any Stockholder is a party to any such Material Contract. Except as set
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forth in Schedule 5.15, the COMPANY and the COMPANY's Subsidiaries have not been
the subject of any election in respect of union representation of employees and
are not bound by or subject to (and none of its respective assets or properties
is bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.15, no employees of the COMPANY or its Subsidiaries are
represented by any labor union or covered by any collective bargaining agreement
and no campaign to establish such representation has ever occurred or is in
progress. There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries) and any
group of its employees, nor has the COMPANY (including the COMPANY's
Subsidiaries) experienced any labor interruptions over the past three years, and
the COMPANY considers its relationship with employees to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
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plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
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(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any
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withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
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(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
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(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect
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timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the
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meaning of Section 168 of the Code. No Acquired Party is a party to any "safe
harbor lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to
any "long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-Closing
Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of
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the transaction. Moreover, shares of COMPANY Stock and shares of URSI Stock held
by STOCKHOLDERS and otherwise sold, redeemed, or disposed of on or after January
1, 1997, including after the Closing Date, will be considered in making this
representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any
STOCKHOLDER-employees of the COMPANY will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not
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exceed 7.5% of the aggregate consideration to be received by such STOCKHOLDERS
pursuant to the Merger.
(xxvi) Intentionally Omitted.
(xxvii) Intentionally Omitted.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
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(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
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5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the
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STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, or of the IPO to
occur at a particular price or within a particular range of prices or to occur
at all; and (iii) the decision of STOCKHOLDERS to enter into this Agreement, or
to vote in favor of or consent to the proposed Merger, has been made independent
of, and without reliance upon, any statements, opinions or other communications
of, or due diligence investigations which have been or will be made or performed
by any prospective Underwriter, relative to URSI or the prospective IPO. The
Underwriters shall have no obligation to the STOCKHOLDERS with respect to any
disclosure contained in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
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be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
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6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly
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issued, fully paid and nonassessable. All of the shares of URSI Stock issued to
persons set forth on Annex III and, based on the representations of STOCKHOLDERS
contained in this Agreement and in the documents delivered to URSI pursuant
hereto, to STOCKHOLDERS pursuant to this Agreement, were or will be offered,
issued, sold and delivered by URSI in compliance with all applicable state and
federal laws concerning the issuance of securities and none of such shares were
or will be issued in violation of the preemptive rights of any past or present
stockholder. On the Closing Date the capitalization of URSI will be as set forth
in the Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or
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contingent, other than those incurred in connection with this Agreement, the
Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. URSI (including URSI's Subsidiaries)
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a URSI Material Adverse Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
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6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY after the Merger will be separate consideration for, or allocable
to, any of their shares of the COMPANY; none of the shares of URSI Stock
received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
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7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Founding Companies other than the COMPANY as confidential in
accordance with the provisions of Section 14 hereof. In addition, URSI will
cause each of the Founding Companies other than the COMPANY to enter into a
provision similar to this Section 7.1 requiring each such Founding Company to
keep confidential any information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
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(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
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make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely
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affect the Tax liability of the Company or any Acquired Party (or URSI following
the Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
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(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-
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Closing, unless such Schedule is to be amended to reflect an event occurring
other than in the ordinary course of business. In the event that the COMPANY
amends or supplements a Schedule pursuant to this Section 7.9, and URSI and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In
the event that URSI amends or supplements a Schedule pursuant to this Section
7.9 and COMPANY and a majority of the Founding Companies do not consent to the
effectiveness of such amendment or supplement at or before the Pre-Closing, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 7.9. In the event
that one of the other Founding Companies amends or supplements a Schedule
pursuant to Section 7.9 of one of the Other Agreements, URSI shall give the
COMPANY notice promptly after it has knowledge thereof. If URSI, COMPANY and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. For
purposes of this Section 7.9, URSI shall be deemed to have given its consent to
the effectiveness of any amendment or supplement to a Schedule if URSI does not
notify COMPANY of its disapproval within 48 hours after URSI is notified of such
amendment or supplement, and COMPANY and each other Founding Company shall be
deemed to have given its consent to the effectiveness of any amendment or
supplement to a Schedule if COMPANY or such other Founding Company, as
applicable, does not notify URSI of its disapproval within 48 hours after
COMPANY or such other Founding Company, as applicable, is notified of such
amendment or supplement. Except as otherwise provided herein, no amendment of or
supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the
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STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
combined financial statements of the COMPANY and CAWI for any quarter subsequent
to December 31, 1997 are required to be included in the Registration Statement,
the COMPANY shall provide, and URSI shall have had sufficient time to review,
the unaudited combined balance sheet and statements of income, cash flows and
retained earnings of the COMPANY and CAWI as of the end of such quarter,
disclosing no Material Adverse Change in the combined financial condition or
results of operations of the COMPANY and CAWI. Such financial statements, which
shall be deemed to be Financial Statements (as described in Section 5.9), shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). To the extent such Financial Statements shall be included or reflected
in the Registration Statement, any events or circumstances reflected therein
which might constitute a Material Adverse Effect with respect to the COMPANY and
CAWI shall be deemed to have been waived by URSI and URSI shall have no rights
in respect of such Material Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
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legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced prior to the initial filing
with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
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8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
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8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
8.15 CAWI Closing. CAWI shall be acquired by URSI on the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
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9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of URSI as a result of which the
management of URSI deems it inadvisable to proceed with the transactions
hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY and CAWI for the fiscal quarters beginning after the
Balance Sheet Date, and the unaudited consolidated combined statement of income,
cash flows and retained earnings of the COMPANY and CAWI for the fiscal quarters
beginning after the Balance Sheet Date, disclosing no material adverse change in
the combined financial condition of the COMPANY and CAWI or the results of their
operations from the financial statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Dwyer
Sheridan & Fitzgerald, counsel to the COMPANY and the STOCKHOLDERS, dated the
Pricing Date, in the form annexed hereto as
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Annex VI, and the Underwriters shall have received a copy of the same opinion
addressed to them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the COMPANY
shall have obtained and delivered to URSI such additional consents to the Merger
as URSI may reasonably request including, without limitation, URSI's receipt on
or prior to the Pricing Date of those licenses, franchises, permits or
governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
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9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
9.16 Releases. The Company shall have been released from its obligations
as guarantor of those mortgage obligations described in Schedule 5.10 of which
David A. Caron and 359 Burnham Street LLC are the obligors, or received
assurances reasonably acceptable to URSI that URSI, as the successor to the
Company, will be released from such obligations promptly following the Closing
Date.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
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(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
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Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to period and (b) prepare
such Tax Returns in a manner consistent with prior years, in each case as
determined in the good faith judgment of the preparer of such returns; provided,
however, that in all events such Tax Returns shall be prepared in a manner
consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
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(a) "Affiliate" of a person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(b) "Interim Period" shall mean any taxable period commencing
prior to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period
that begins before the Closing Date and ends on or before the Closing Date and
(ii) the portion of any Interim Period through and including the Closing Date.
(d) "Post-Closing Period" means any taxable period that begins
after the Closing Date, and, with respect to any Interim Period, the portion of
such Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income,
gross receipts, ad valorem, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A), customs duties, capital stock, net worth, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, workers compensation, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government,
including any interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations,
claims for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, having or purporting to have jurisdiction with respect to
any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such
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guarantees on indebtedness being assumed by URSI. URSI agrees to indemnify the
STOCKHOLDERS against any and all claims made by lenders under such guarantee
which arise as a result of URSI's failure to cause such guarantee to be released
on or prior to the Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify under Section 401(a) of the Code and makes contributions to such plan
at or above the level stated in Schedule 10.9, or (ii) in the case of each other
Plan, URSI establishes a replacement Plan providing equivalent or better
benefits, provided that if the cost of providing equivalent benefits should, in
the good faith judgment of URSI, become commercially unreasonable, the
replacement plan established by URSI may have benefits that are, in the good
faith judgment of URSI, as close to equivalent as can be obtained at
commercially reasonable cost. There are no intended third party beneficiaries of
this Section 10.9, and after the Closing Date it can be waived or modified by
URSI and STOCKHOLDERS (or their successors) shown as owning two-thirds of
COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except with respect to
Sections 5.30 through 5.32, which shall be several), will indemnify, defend,
protect and hold harmless URSI, the COMPANY and the Surviving Corporation at all
times from and after the date of this Agreement until the Expiration Date as
defined in Section 5 above, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by URSI, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith (other than the
representations and warranties provided in Section 5.22, for which Section 11.6
provides special indemnity provisions); (ii) any nonfulfillment of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or
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otherwise, (x) arising out of or based upon any untrue statement of a material
fact relating to the COMPANY (including the COMPANY's Subsidiaries) or the
STOCKHOLDERS that is provided to URSI or its counsel by the COMPANY or the
STOCKHOLDERS and contained in any preliminary prospectus relating to the IPO,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or (y) arising out of or based upon any
omission to state therein a material fact relating to the COMPANY (including the
COMPANY's Subsidiaries) or the STOCKHOLDERS that is required to be stated
therein or necessary to make the statements therein not misleading, and not
provided to URSI or its counsel by the COMPANY or the STOCKHOLDERS, provided,
however, that such indemnity shall not inure to the benefit of URSI, the COMPANY
or the Surviving Corporation to the extent that such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in
writing, corrected information to URSI counsel and to URSI for inclusion in the
final prospectus, and such information was not so included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
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11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if such
counsel shall have a conflict of interest that prevents such counsel from
representing Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing and Indemnifying
Party will reimburse the Indemnified Party for the expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim and all additional costs
of settlement or judgment. If the Indemnifying Party does not undertake to
defend such matter as to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to
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pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for any Tax benefits, Tax detriments or
insurance proceeds in determining the amount of any indemnification obligation
under this Section, provided that no Indemnifying Party shall be obligated to
seek any payment pursuant to the terms of any insurance policy. All
indemnification payments under this Section shall be deemed adjustments to the
Merger consideration provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement plus the aggregate value of the consideration paid to the
stockholders of CAWI pursuant to Section 2.2 of the Agreement and Plan of
Reorganization among URSI, CAWI and the stockholders of CAWI ("CAWI Agreement")
unless this Agreement is terminated prior to the Closing Date, in which event
the Indemnification Threshold is an amount equal to two percent (2%) of the
Minimum Value set forth in Annex I. All such amounts otherwise payable by one or
more STOCKHOLDERS in excess of the amount so offset and reduced shall be paid
without offset or reduction pursuant to this Section 11.5(i). This Section
11.5(i) shall not apply to amounts payable pursuant to Section 11.6. For
purposes of determining the Indemnification Threshold, the
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URSI Stock shall be valued at the initial price of the URSI Stock sold to the
public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no event shall any STOCKHOLDER be
liable under this Agreement, including this Section 11 and the CAWI Agreement,
to pay more than one-half the amount of the proceeds received by such
STOCKHOLDER pursuant to this Agreement and the CAWI Agreement, calculated as
provided in Section 11.5(iv), with respect to Specially Limited Claims and
"Specially Limited Claims" as such term is defined in the CAWI Agreement.
Specially Limited Claims are all claims that may be made pursuant to this
Agreement, including this Section 11, except claims based on (a) breach of
representations and warranties in Section 5.13, (b) breach of representations
and warranties in Section 5.19 or Section 5.20 or (c) Section 11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11 and the
CAWI Agreement, for amounts which in the aggregate exceed the amount of proceeds
received by such STOCKHOLDER pursuant to this Agreement and the CAWI Agreement.
The amount of proceeds received by each STOCKHOLDER pursuant to this Agreement
shall be calculated (for purposes of Section 11.5(iii) and this Section
11.5(iv)) by adding (a) the cash proceeds paid to such STOCKHOLDER pursuant to
Section 2.2 hereof prior to the date that the indemnity obligation of such
STOCKHOLDER is paid, plus (b) the net proceeds to such STOCKHOLDER from the sale
of such STOCKHOLDER's URSI Stock received pursuant to Section 2.2 hereof prior
to
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the date that the indemnity obligation of such STOCKHOLDER is paid, plus (c) the
Fair Market Value (as defined in Annex I) of the unsold shares of URSI Stock
received by such STOCKHOLDER pursuant to Section 2.2 prior to the date that the
indemnity obligation of such STOCKHOLDER is paid, valued on the trading day
prior to the day the indemnification obligation is paid. The amount of proceeds
received by a STOCKHOLDER under the CAWI agreement shall be determined as set
forth in Section 11.5(iv) thereof.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first been
provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and all Taxes
(including without limitation any obligation to contribute to the payment of, or
be entitled to share in the refund of, a Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations
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that includes or included the COMPANY or any Acquired Party) which are (i)
imposed on any member (other than the COMPANY or any Acquired Party) of the
consolidated, unitary or combined group which includes or included the COMPANY
or any Acquired Party or (ii) imposed on the COMPANY or any Acquired Party in
respect of its income, business, property or operations or for which the COMPANY
or any Acquired Party may otherwise be liable (A) for any Pre-Closing Period,
(B) resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to any items of income or gain of an
entity treated as a partnership reported by the COMPANY or any Acquired Party as
a partner, to the extent such items are properly attributable to periods of the
"partnership" ending on or before the Closing Date, or (G) attributable to any
discharge of indebtedness that may result from any capital contributions by
STOCKHOLDERS (or an affiliate of STOCKHOLDERS) to the COMPANY or any Acquired
Party of any intercompany indebtedness owed by COMPANY to any STOCKHOLDER (or an
affiliate of any STOCKHOLDER), but, in each case, only to the extent such Taxes
or the entitlement to such refund are not reflected on the applicable Company
Financial Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv) or Section 5.22(xxv) and (y) any liability imposed
on URSI, the COMPANY and any Acquired Party (or any affiliate of such companies)
attributable to any breach of a warranty or representation made by STOCKHOLDERS
in Section 5.22, excluding Section 5.22(xx), Section 5.22(xxiv) and Section
5.22(xxv).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party
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with respect to any Post-Closing Period and (y) any liability imposed on
STOCKHOLDERS attributable to any breach of a warranty or representation made by
URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
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(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
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12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre-Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements
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prepared by KPMG Peat Marwick LLP only if (i) such termination is not based on
Section 7.9 or a material breach or default by any STOCKHOLDER or COMPANY and
(ii) COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no
event shall COMPANY or any STOCKHOLDER use any such financial statement within
one year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice
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that such prospective acquisition candidate was called upon, or that an
acquisition analysis was made, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations under this
Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of
this Section 13 if URSI and/or any subsidiary thereof shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
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court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against URSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
URSI of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in this Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto, except that upon URSI's admission in
writing, or a final judicial determination which is not the subject of appeal or
further appeal by URSI, that URSI has materially breached a STOCKHOLDER's
Employment Agreement (if applicable), right to have URSI Stock registered under
the 1933 Act pursuant to Section 17.1 or 17.2, or right to receive contingent
consideration as provided in section C of Annex I, and URSI's failure to cure
such material breach within 30 days of such admission or final judicial
determination, whichever is applicable, then the covenants contained in this
Section 13 with respect to such STOCKHOLDER will expire. The covenants contained
in this Section 13 shall have no effect if the transactions contemplated by this
Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel)
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agree to the confidentiality provisions of this Section 14.1; provided, further,
that confidential information shall not include (i) such information which
becomes known to the public generally through no fault of the STOCKHOLDERS, (ii)
information required to be disclosed by law or the order of any governmental
authority under color of law, provided that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give prior
written notice thereof to URSI and provide URSI with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
STOCKHOLDERS of the provisions of this section, URSI shall be entitled to an
injunction restraining such STOCKHOLDERS from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
URSI from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. Upon termination of this Agreement prior to the Closing Date
for any reason other than the material breach or default of any STOCKHOLDER or
COMPANY, URSI will return to COMPANY all documents containing confidential
information of COMPANY that were provided to URSI by COMPANY or STOCKHOLDERS and
all summaries, abstractions, projections, pro formas or like material prepared
by URSI incorporating such confidential information. In the event of a breach or
threatened breach by URSI of the provisions of this section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining URSI from
disclosing, in whole or in part, such confidential information. Nothing
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herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as URSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
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THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel) by the terms
and conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which a majority of the interests therein by
value is owned by the STOCKHOLDER and members of the STOCKHOLDER's family, and
(y) which is and continues to be controlled by the STOCKHOLDER and members of
the STOCKHOLDER'S family for the period set forth in Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
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16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests, provided that URSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to URSI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a reorganization described in Section 368(a)(1)(A)
of the Code. In addition, if URSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than URSI is greater than the number of
such shares which can be offered without adversely affecting the offering, URSI
may reduce the number of shares offered for the accounts of such persons to a
number deemed satisfactory by such managing underwriter, provided that such
reduction shall be made first by reducing the number of shares to be sold by
persons other than URSI, the stockholders named on Annex III hereto, the
stockholders of the Founding Companies, and any
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person or persons who have required such registration pursuant to "demand"
registration rights granted by URSI; thereafter, if a further reduction is
required, it shall be made first by reducing the number of shares to be sold by
the stockholders named on Annex III hereto and the stockholders of the Founding
Companies, with such further reduction being made so that to the extent any
shares can be sold by stockholders named in Annex III hereto and the
stockholders of the Founding Companies, each such stockholder will be permitted
to sell a number of shares proportionate to the number of shares of URSI Stock
owned by such stockholder immediately after the Closing, provided that if any
stockholder does not wish to sell all shares such stockholder is permitted to
sell, the opportunity to sell additional shares shall be reallocated in the same
manner to those stockholders named in Annex III hereto and stockholders of the
Founding Companies who wish to sell more shares until no more shares can be sold
by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
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If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER may request in writing
that URSI file a registration statement under the 1933 Act requesting such
number of such STOCKHOLDER's shares of URSI Stock as is required to be sold to
pay the difference between the cash proceeds and the amount of the
indemnification obligation, plus legal and other expenses, including expenses of
the offering, provided arrangements are made to URSI's reasonable satisfaction
that the proceeds will be used solely for the purpose of such indemnification
and the payment of related expenses and that arrangements are made to the
reasonable satisfaction of URSI that the proceeds of such sale will be used
solely for the purpose of such indemnification and the payment of related
expenses, and that no such request may be made until after one hundred eighty
(180) days following the Closing Date without the consent of the managing
underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
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17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the
Pre-Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
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18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be modified or amended only by a written instrument
executed by the STOCKHOLDERS, the COMPANY and URSI, acting through their
respective officers, duly authorized by their respective Boards of Directors.
Any disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all
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<PAGE>
sales, use, transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") incurred in connection with the transactions
contemplated by this Agreement. The STOCKHOLDERS shall file all necessary
documentation and Returns with respect to such Transfer Taxes. In addition, each
STOCKHOLDER acknowledges that he, and not the COMPANY or URSI, will pay all
taxes due upon receipt of the consideration payable to such STOCKHOLDER pursuant
to Section 2 hereof. Notwithstanding the foregoing, any of the above fees,
expenses or disbursements fairly attributable to the Company but payable by the
STOCKHOLDERS and incurred prior to the Pricing Date may be paid from COMPANY
funds rather than from personal funds of the STOCKHOLDERS, provided that the
STOCKHOLDERS provide to URSI, prior to the Pricing Date, a detailed statement
setting forth the type and amount of all such fees, expenses or disbursements so
paid, and, provided further, that the aggregate amount of same shall be
deducted, on a dollar-for-dollar basis, from the amount of cash into which the
COMPANY Stock shall be converted pursuant to Section 2.2 hereof. Notwithstanding
the foregoing provisions of Section 18.6, URSI shall further pay or reimburse
reasonable costs of counsel or co-counsel for the Company if and to the extent
so mutually agreed in advance between URSI and such counsel, in circumstances
where URSI believes it obtained or may have obtained a material benefit, in
light of market conditions and other factors, by reason of such counsel or
co-counsel expediting the transaction which is the subject of this Agreement and
reducing the time required to complete this Agreement and the Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
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<PAGE>
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
Caron Auto Brokers, Inc.
359 Burnham
East Hartford, CT 06108
Attn: David A. Caron
and marked "Personal and Confidential" with copies to:
Thomas Sheridan, Esq.
Dwyer Sheridan & Fitzgerald
Box 537
Glastonbury, CT 06033
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of
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<PAGE>
the Connecticut state court of general jurisdiction in Hartford County,
Connecticut (or, if there is federal jurisdiction, then the exclusive
jurisdiction and venue of the United States District Court having jurisdiction
over Hartford County). The parties hereby consent to the personal and exclusive
jurisdiction and venue of said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
__________________________________ By _______________________________
Name:
Title:
WITNESS: STOCKHOLDERS:
__________________________________ __________________________________
David A. Caron
WITNESS: CARON AUTO BROKERS, INC.
__________________________________ By _______________________________
Name:
Title:
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<PAGE>
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
CARON AUTO BROKERS, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $1,500,000 in cash.
2. 125,000 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $3,000,000.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate
the Merger if the aggregate value of cash and URSI Stock (valued at the IPO
initial public offering price) is less than the Minimum Value of $2,812,500.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
David A. Caron 125,000 $1,500,000
------- ----------
TOTALS: 125,000 $1,500,000
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 1 Excess Revenues are greater than zero, then:
<PAGE>
a. Two and one-half percent (2.5%) of Year 1 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 1 Payout Date.
b. Two and one-half percent (2.5%) of Year 1 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 2 Payout Date, provided that
Year 2 Actual Revenues are equal to or greater than Year 1 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 1 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 3 Payout Date, provided that
Year 3 Actual Revenues are equal to or greater than Year 1 Actual Revenues.
d. Two and one-half percent (2.5%) of Year 1 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that
Year 4 Actual Revenues are equal to or greater than Year 1 Actual Revenues.
e. Two and one-half percent (2.5%) of Year 1 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that
Year 5 Actual Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 2 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 2 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 2 Payout Date.
b. Two and one-half percent (2.5%) of Year 2 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 3 Payout Date, provided that
Year 3 Actual Revenues are equal to or greater than Year 2 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 2 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that
Year 4 Actual Revenues are equal to or greater than Year 2 Actual Revenues.
d. Two and one-half percent (2.5%) of Year 2 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that
Year 5 Actual Revenues are equal to or greater than Year 2 Actual Revenues.
<PAGE>
3. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 3 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 3 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 3 Payout Date.
b. Two and one-half percent (2.5%) of Year 3 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 4 Payout Date, provided that
Year 4 Actual Revenues are equal to or greater than Year 3 Actual Revenues.
c. Two and one-half percent (2.5%) of Year 3 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that
Year 5 Actual Revenues are equal to or greater than Year 3 Actual Revenues.
4. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 4 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 4 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 4 Payout Date.
b. Two and one-half percent (2.5%) of Year 4 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 5 Payout Date, provided that
Year 5 Actual Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 5 Excess Revenues are greater than zero, then:
a. Two and one-half percent (2.5%) of Year 5 Excess Revenues
will be paid to STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the aggregate revenues
reported by URSI for a fiscal year that are generated by operations acquired by
URSI by means of the Merger and operations acquired by means of the merger
transaction described in that certain Agreement and Plan of Reorganization among
URSI, David A. Caron, Richard J. and Barbara B. Caron, and Caron Auto Works,
Inc. (the "CAWI Merger"), provided that revenues reported by
<PAGE>
URSI for fiscal year 1998 will be adjusted to reflect revenues of COMPANY and
Caron Auto Works, Inc. from January 1, 1998 until the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year
1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year
1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year
2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year
2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year
2002.
g. "Year 1 Target Revenues" means $7,200,000.
h. "Year 2 Target Revenues" means the greater of (i) 110% of
Year 1 Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of
Year 2 Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of
Year 3 Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of
Year 4 Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year
1 Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are
equal to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are
zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year
2 Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are
equal to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are
zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year
3 Actual Revenues over Year 3 Target Revenues. If Year 3 Target
<PAGE>
Revenues are equal to or greater than Year 3 Actual Revenues, Year 3 Excess
Revenues are zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year
4 Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are
equal to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are
zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year
5 Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are
equal to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are
zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI
announces its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2000.
t. "Year 4 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues,
including without limitation decisions regarding the allocation and
non-allocation of capital and other resources, decisions regarding business that
will be accepted or rejected, personnel decisions including decisions to lay off
employees, and decisions to shut down or downsize operations, all without making
any offsetting adjustments to Revenues or contingent consideration, provided
only that such decisions are made in a good faith effort to maximize total
return to the shareholders of URSI to the extent that the same can be realized
without undue risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired by
URSI by means of the Merger or the CAWI Merger are sold, a reasonable adjustment
will be made to these provisions so that the contingent consideration paid to
STOCKHOLDERS will be approximately the same as it would have been if the fiscal
year had not been changed or the sale had not been made, as applicable.
<PAGE>
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock
to be paid as contingent consideration, URSI Stock will be valued at Fair Market
Value as of the trading day the day before the contingent consideration is paid.
"Fair Market Value" of the URSI Stock as of a date means the market price per
share of such Shares determined by the Board of Directors of URSI as follows:
(a) if the URSI Stock is traded on a stock exchange on the date in question,
then the Fair Market Value will be equal to the closing price reported by the
applicable composite-transactions report for such date; (b) if the URSI Stock is
traded over-the-counter on the date in question and is classified as a national
market issue, then the Fair Market Value will be equal to the last-transaction
price quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
11. Despite anything to the contrary in this Annex I or elsewhere in
the Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS
as contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or
the number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
13. The right to be paid contingent consideration is personal and
cannot be assigned by any STOCKHOLDER without the consent of URSI except upon
the death of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon
any STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
<PAGE>
STOCKHOLDER Percentage
----------- ----------
David A. Caron 100%
---
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of each
Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,850 50% 50%
Keystone Towing, 377,624 50% 50%
Inc.
Northland Auto 588,435 50% 50%
Transporters, Inc.
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,628,365
<PAGE>
EXHIBIT 2.7
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
ABSOLUTE TOWING & TRANSPORTING, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 3
2.1 Manner of Conversion 3
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES 4
4. PRE-CLOSING AND CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 8
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 10
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
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Page
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5.18 Compensation; Employment Agreements 14
5.19 Employee Plans 14
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
Taxes 19
5.23 No Violations 23
5.24 Government Contracts 23
5.25 Absence of Changes 23
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 25
5.28 Relations with Governments 25
5.29 Disclosure 25
(B) Representations and Warranties of STOCKHOLDERS 26
5.30 Authority; Ownership 26
5.31 Preemptive Rights 26
5.32 No Intention to Dispose of URSI Stock 26
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 27
6.2 URSI Stock 27
6.3 Validity of Obligations 27
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI STOCK 28
6.7 No Side Agreements 29
6.8 Subsidiaries 29
6.9 Business; Real Property; Material Agreements; Financial
Information 29
6.10 Conformity with Law 30
6.11 No Violations 30
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 32
7.3 Prohibited Activities 33
7.4 No Shop 35
7.5 Notice to Bargaining Agents 35
7.6 Termination of Plans 35
7.7 URSI Prohibited Activities 35
7.8 Notification of Certain Matters 36
7.9 Amendment of Schedules 36
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<PAGE>
Page
----
7.10 Cooperation in Preparation of Registration Statement 37
7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY 38
8.1 Representations and Warranties; Performance of Obligations 38
8.2 Satisfaction 38
8.3 No Litigation 39
8.4 Stockholders' Release 39
8.5 Opinion of Counsel 39
8.6 Director Indemnification 39
8.7 Registration Statement 40
8.8 Consents and Approvals 40
8.9 Good Standing Certificates 40
8.10 No Waivers 40
8.11 No Material Adverse Change 40
8.12 Transfer Restrictions 40
8.13 Employment Agreements, Consulting Agreements, Leases and
Cosale Agreement 41
8.14 Tax Opinion 41
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 41
9.1 Representations and Warranties; Performance of Obligations 41
9.2 No Litigation 41
9.3 Examination of Final Financial Statements 42
9.4 No Material Adverse Effect 42
9.5 STOCKHOLDERS' Release 42
9.6 Satisfaction 42
9.7 Termination of Related Party Agreements 42
9.8 Opinion of Counsel 42
9.9 Consents and Approvals 42
9.10 Good Standing Certificates 43
9.11 Registration Statement 43
9.12 Employment Agreements, Consulting Agreements and Leases 43
9.13 Repayment of Indebtedness 43
9.14 FIRPTA Certificate 44
9.15 Insurance 44
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS 44
10.1 Preservation of Tax and Accounting Treatment 44
10.2 Disclosure 44
10.3 Cooperation in Tax Return Preparation 45
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<PAGE>
Page
----
10.4 Tax Return Preparation and Filing 45
10.5 Reorganization Status Information Reporting 46
10.6 Special Definitions Related to Tax Matters 46
10.7 Directors 47
10.8 Release from Guarantees 47
10.9 Preservation of Plans 47
10.10 Option 48
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS 49
11.2 Indemnification by URSI 50
11.3 Third Person Claims 50
11.4 Exclusive Remedy 52
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 54
11.7 Special Contest Rights Related to Tax Matters 56
11.8 Special Notification Requirements Regarding Tax Disputes 56
11.9 Refunds 57
11.10 Optional Payment With Shares 57
12. TERMINATION OF AGREEMENT 57
12.1 Termination 57
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements. 58
13. NONCOMPETITION 58
13.1 Prohibited Activities 58
13.2 Damages 59
13.3 Reasonable Restraint 60
13.4 Severability; Reformation 60
13.5 Independent Covenant 60
13.6 Materiality 61
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 61
14.1 STOCKHOLDERS 61
14.2 URSI 62
14.3 Damages 62
14.4 Survival 62
15. TRANSFER RESTRICTIONS 63
15.1 Transfer Restrictions 63
15.2 Permitted Transferees 63
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<PAGE>
Page
----
16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 64
16.2 Accredited Investors; Economic Risk; Sophistication 64
17. REGISTRATION RIGHTS 65
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 66
17.3 Registration Procedures 67
17.4 Underwriting Agreement 67
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 68
18. GENERAL s 68
18.1 Cooperation 68
18.2 Successors and Assigns 68
18.3 Entire Agreement 68
18.4 Counterparts 69
18.5 Brokers and Agents 69
18.6 Expenses 69
18.7 Notices 70
18.8 Governing Law; Forum 71
18.9 Survival of Representations and Warranties 71
18.10 Exercise of Rights and Remedies 71
18.11 Time 72
18.12 Reformation and Severability 72
18.13 Remedies Cumulative 72
18.14 Captions 72
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<PAGE>
SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
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Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
Material Documents 5.23
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Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), ABSOLUTE TOWING & TRANSPORTING, INC., a ______
corporation (the "COMPANY"), and the stockholders listed on Annex II (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of ASC Transportation
Services, Caron Auto Brokers, Inc., Caron Auto Works, Inc., Falcon Towing and
Auto Delivery, Inc., Keystone Towing, Inc., Northland Auto Transporters, Inc.,
Northland Fleet Leasing Company, Silver State Tow & Recovery, Inc. and
Smith-Christensen Enterprises, Inc. (the "Other Companies") in order to acquire
additional vehicle towing and transport companies (the Other Companies, together
with the COMPANY, are collectively referred to herein as the "Founding
Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations
will cause Articles of Merger with respect to the Merger (the "Articles of
Merger") to be signed, verified and delivered to the Secretary of State of the
State of Delaware and, if required, the Articles of Merger or a similar document
to be signed, verified and filed with the relevant authorities
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in the jurisdiction in which the COMPANY is organized, on or before the
Closing Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 10,000 shares of common stock ("COMPANY Stock"), of
which 1,000 shares are issued and outstanding; and
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(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
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(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of URSI Stock and the
amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as
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set forth in Section 2.2, notwithstanding the number of shares of COMPANY Stock
such certificates represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of URSI
Stock, and the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger, shall occur and be deemed to be completed. If so
requested by any STOCKHOLDER at or prior to the Pre- Closing, URSI will use its
best efforts to cause all cash to be paid to such STOCKHOLDER on the CLOSING
DATE to be paid by the Underwriters (as defined in Section 5.29) by initiating a
wire transfer payment pursuant to instructions included in STOCKHOLDER's
request. After the Pre-Closing and until the Closing Date, no party may
withdraw, terminate or rescind any
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delivery made at the Pre-Closing unless this Agreement is terminated as provided
in Section 12. All documents delivered at the Pre-Closing shall be held by
Howard Rice for final delivery on the Closing Date as directed by the parties
and their counsel at the Pre-Closing, provided only that the Articles of Merger
and any similar document may be filed to become effective on the Closing Date.
Should the Agreement be terminated as provided in Section 12 prior to the
Closing Date, the parties shall take all steps necessary to rescind any such
filings, Howard Rice shall return all documents delivered at the Pre- Closing to
the parties who delivered the same, all such deliveries at the Pre- Closing will
be rescinded and a nullity, the Merger shall not become effective, the shares of
COMPANY Stock will not be converted into URSI Stock, and shares of URSI Stock
will not be delivered to STOCKHOLDERS. The documents delivered at Pre-Closing
shall include documents required to rescind, prior to the Closing Date, any
filing of the Articles of Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
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5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and the COMPANY's Subsidiaries, taken as a whole (a "Material
Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in which the
COMPANY is authorized or qualified to do business. True, complete and correct
copies of the Certificate of Incorporation and Bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the "Charter
Documents"), certified by the Secretary or Assistant Secretary of the COMPANY,
are all attached hereto as Schedule 5.1. A true, complete and correct copy of
each Certificate of Incorporation included in the Charter Documents, certified
by the Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind. All
of the issued and outstanding shares of the capital stock of the COMPANY have
been duly authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the STOCKHOLDERS and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder.
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5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY
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("Affiliates") other than in the ordinary course of business, within the
preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's Balance Sheet as of December 31, 1997 and 1996 and
Statements of Operations, Cash Flows and Retained Earnings for each of the years
in the two-year period ended December 31, 1997 (December 31, 1997 being
hereinafter referred to as the "Balance Sheet Date"). Such Financial Statements
have been prepared in accordance with KPMG Peat Marwick LLP's interpretation of
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted). Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present
fairly the financial position of the COMPANY (and each of the COMPANY's
Subsidiaries on a consolidated basis) as of the dates indicated thereon, and
such Statements of Operations, Cash Flows and Retained Earnings present fairly
the results of their respective operations for the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such
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balance sheet were being prepared immediately prior to Closing or if such
liabilities represent liabilities of the nature described in Section 5.13,
Section 5.20 and/or Section 5.22 (excluding items subject to any knowledge
qualifications contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(A) copies of all relevant documentation relating thereto;
(B) amounts claimed and any other action or relief sought;
and
(C) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the
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amount shown on Schedule 5.11, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or
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Hazardous Substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the COMPANY
or any of the COMPANY's Subsidiaries where Solid Wastes, Hazardous Wastes or
Hazardous Substances have been treated, stored, used, disposed of or otherwise
handled; (iii) there have been no releases (as defined in Environmental Laws)
at, from, under, in or on any property owned or operated by the COMPANY or any
of the COMPANY's Subsidiaries except as permitted by Environmental Laws; (iv) to
the knowledge of the COMPANY there is no on-site or off-site location to which
the COMPANY or any of the COMPANY's Subsidiaries has transported or disposed of
Solid Wastes, Hazardous Wastes or Hazardous Substances or arranged for the
transportation of Solid Wastes, Hazardous Wastes or Hazardous Substances, which
site is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
any of the COMPANY's Subsidiaries or URSI for any clean-up cost, remedial work,
damage to natural resources or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) to the knowledge of the COMPANY the
COMPANY has no contingent liability in connection with any release of any Solid
Waste, Hazardous Waste or Hazardous Substance into the environment. Schedule
5.13 lists all releases of Hazardous Wastes or Hazardous Substances by the
COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500, including in the case of
(z) true, complete and correct copies of all such leases and including in cases
(x), (y) and (z) an indication as to which real and personal property is
currently owned, or was formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as shown on Schedule 5.14, all
of the trucks and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedule 5.14 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.14 are in full force and effect and constitute valid and binding agreements on
the COMPANY (or a COMPANY Subsidiary, as applicable), and to the knowledge of
the COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their respective
terms. All fixed assets used by the COMPANY and the COMPANY's Subsidiaries that
are material to the
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operation of their respective businesses are either owned by the COMPANY or the
COMPANY's Subsidiaries or leased under an agreement indicated on Schedule 5.14.
Schedule 5.14 shall, without limitation, contain true, complete and correct
copies of all title reports and title insurance policies received or owned by
the COMPANY or the COMPANY's Subsidiaries. The COMPANY has also provided in
Schedule 5.14 a summary description of all plans or projects which have been
memorialized in any written or electronic document or file and involves the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, with respect to which the
COMPANY (or any of the COMPANY's Subsidiaries) has made any expenditure in the
two-year period prior to the date of the Agreement in excess of $10,000, or
which if pursued by the COMPANY (or such Subsidiary) would require additional
expenditures of capital in excess of $10,000. Except as set forth on Schedule
5.14 and except for liens excepted in Section 7.3(vi)(1) and (3), there are no
liens against the COMPANY's properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
leases, liens, pledges or other security agreements) (a) as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to URSI, except
that leases set forth on Schedule 5.14 need not be set forth on Schedule 5.15.
Except to the extent set forth on Schedule 5.15, (i) none of the COMPANY's
(including the COMPANY's Subsidiaries) significant customers has cancelled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel any Material Contract or substantially
reduce utilization of the services provided by the COMPANY (including the
COMPANY's Subsidiaries), and (ii) the COMPANY and the COMPANY's Subsidiaries
have complied with all material commitments and obligations pertaining to any
Material Contract, and are not in default under any such Material Contract, and
no notice of default has been received, and no Stockholder or any affiliate of
any Stockholder is a party to any such Material Contract. Except as set
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forth in Schedule 5.15, the COMPANY and the COMPANY's Subsidiaries have not been
the subject of any election in respect of union representation of employees and
are not bound by or subject to (and none of its respective assets or properties
is bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.15, no employees of the COMPANY or its Subsidiaries are
represented by any labor union or covered by any collective bargaining agreement
and no campaign to establish such representation has ever occurred or is in
progress. There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries) and any
group of its employees, nor has the COMPANY (including the COMPANY's
Subsidiaries) experienced any labor interruptions over the past three years, and
the COMPANY considers its relationship with employees to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
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plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
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(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any
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withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
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(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
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(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect
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timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the
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meaning of Section 168 of the Code. No Acquired Party is a party to any "safe
harbor lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to
any "long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-
Closing Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of
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the transaction. Moreover, shares of COMPANY Stock and shares of URSI Stock held
by STOCKHOLDERS and otherwise sold, redeemed, or disposed of on or after January
1, 1997, including after the Closing Date, will be considered in making this
representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any STOCKHOLDER-
employees of the COMPANY will be separate consideration for, or allocable to,
any of their shares of the COMPANY; none of the shares of URSI Stock received by
any STOCKHOLDER-employees in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
STOCKHOLDER-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not
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exceed 7.5% of the aggregate consideration to be received by such STOCKHOLDERS
pursuant to the Merger.
(xxvi) The fair market value of the sum of (i) all dividends paid
and distributions made on or after January 1, 1997 and through the Closing Date
in respect of COMPANY Stock and (ii) all consideration paid by the COMPANY on or
after January 1, 1997 and through the Closing Date in connection with all direct
and indirect redemptions, purchases and other acquisitions of COMPANY Stock is
no greater than $367,097.
(xxvii) Intentionally Omitted.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
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(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
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(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written,
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that a Registration Statement will become effective or that the IPO pursuant
thereto will occur at a particular price or within a particular range of prices
or occur at all; (ii) neither URSI nor any of its officers, directors, agents or
representatives nor any prospective underwriters in the IPO (the "Underwriters")
shall have any liability to the COMPANY, the STOCKHOLDERS or any other person
affiliated or associated with the COMPANY for any failure of the Registration
Statement to become effective, or of the IPO to occur at a particular price or
within a particular range of prices or to occur at all; and (iii) the decision
of STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent
to the proposed Merger, has been made independent of, and without reliance upon,
any statements, opinions or other communications of, or due diligence
investigations which have been or will be made or performed by any prospective
Underwriter, relative to URSI or the prospective IPO. The Underwriters shall
have no obligation to the STOCKHOLDERS with respect to any disclosure contained
in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
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6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action,
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duly executed and delivered and are or will be legal, valid and binding
obligations of URSI, enforceable against URSI in accordance with their
respective terms.
6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will
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be a party to or subject to any voting trust, proxy or other agreement or
understanding with respect to the shares of capital stock of URSI owned by such
STOCKHOLDER. All of the shares of URSI Stock to be issued to the STOCKHOLDERS in
accordance herewith will be duly authorized, validly issued, fully paid and
nonassessable. All of the shares of URSI Stock issued to persons set forth on
Annex III and, based on the representations of STOCKHOLDERS contained in this
Agreement and in the documents delivered to URSI pursuant hereto, to
STOCKHOLDERS pursuant to this Agreement, were or will be offered, issued, sold
and delivered by URSI in compliance with all applicable state and federal laws
concerning the issuance of securities and none of such shares were or will be
issued in violation of the preemptive rights of any past or present stockholder.
On the Closing Date the capitalization of URSI will be as set forth in the
Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial
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position of URSI as of the dates indicated thereon, and such financial
statements present fairly the results of their respective operations for the
periods indicated thereon. URSI has no material liabilities, accrued or
contingent, other than those incurred in connection with this Agreement, the
Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. URSI (including URSI's Subsidiaries)
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a URSI Material Adverse Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
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6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-
employees of the COMPANY after the Merger will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
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7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Founding Companies other than the COMPANY as confidential in
accordance with the provisions of Section 14 hereof. In addition, URSI will
cause each of the Founding Companies other than the COMPANY to enter into a
provision similar to this Section 7.1 requiring each such Founding Company to
keep confidential any information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
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(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
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make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely
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affect the Tax liability of the Company or any Acquired Party (or URSI
following the Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
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(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre- Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-
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Closing, unless such Schedule is to be amended to reflect an event occurring
other than in the ordinary course of business. In the event that the COMPANY
amends or supplements a Schedule pursuant to this Section 7.9, and URSI and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In
the event that URSI amends or supplements a Schedule pursuant to this Section
7.9 and COMPANY and a majority of the Founding Companies do not consent to the
effectiveness of such amendment or supplement at or before the Pre-Closing, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 7.9. In the event
that one of the other Founding Companies amends or supplements a Schedule
pursuant to Section 7.9 of one of the Other Agreements, URSI shall give the
COMPANY notice promptly after it has knowledge thereof. If URSI, COMPANY and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. For
purposes of this Section 7.9, URSI shall be deemed to have given its consent to
the effectiveness of any amendment or supplement to a Schedule if URSI does not
notify COMPANY of its disapproval within 48 hours after URSI is notified of such
amendment or supplement, and COMPANY and each other Founding Company shall be
deemed to have given its consent to the effectiveness of any amendment or
supplement to a Schedule if COMPANY or such other Founding Company, as
applicable, does not notify URSI of its disapproval within 48 hours after
COMPANY or such other Founding Company, as applicable, is notified of such
amendment or supplement. Except as otherwise provided herein, no amendment of or
supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the
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STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
financial statements of the COMPANY for any quarter subsequent to December 31,
1997 are required to be included in the Registration Statement, the COMPANY
shall provide, and URSI shall have had sufficient time to review, the unaudited
balance sheet and statements of income, cash flows and retained earnings of the
COMPANY as of the end of such quarter, disclosing no Material Adverse Change in
the financial condition or results of operations of the COMPANY. Such financial
statements, which shall be deemed to be Financial Statements (as described in
Section 5.9), shall have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted therein). To the extent such Financial Statements
shall be included or reflected in the Registration Statement, any events or
circumstances reflected therein which might constitute a Material Adverse Effect
with respect to the COMPANY shall be deemed to have been waived by URSI and URSI
shall have no rights in respect of such Material Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
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STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced prior to the initial filing
with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
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amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
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pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of URSI as a result of
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which the management of URSI deems it inadvisable to proceed with the
transactions hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY for the fiscal quarters beginning after the Balance Sheet
Date, and the unaudited consolidated statement of income, cash flows and
retained earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no material adverse change in the financial
condition of the COMPANY or the results of its operations from the financial
statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Clark &
Trevithick, counsel to the COMPANY and the STOCKHOLDERS, dated the Pricing Date,
in the form annexed hereto as Annex VI, and the Underwriters shall have received
a copy of the same opinion addressed to them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the
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COMPANY shall have obtained and delivered to URSI such additional consents to
the Merger as URSI may reasonably request including, without limitation, URSI's
receipt on or prior to the Pricing Date of those licenses, franchises, permits
or governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
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9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
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the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to
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period and (b) prepare such Tax Returns in a manner consistent with prior years,
in each case as determined in the good faith judgment of the preparer of such
returns; provided, however, that in all events such Tax Returns shall be
prepared in a manner consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(A) "Affiliate" of a person or entity shall mean a person or entity
that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(B) "Interim Period" shall mean any taxable period commencing prior
to the Closing Date and ending after the Closing Date.
(C) "Pre-Closing Period" shall mean (i) any taxable period that
begins before the Closing Date and ends on or before the Closing Date and (ii)
the portion of any Interim Period through and including the Closing Date.
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(D) "Post-Closing Period" means any taxable period that begins after
the Closing Date, and, with respect to any Interim Period, the portion of such
Interim Period commencing on the Closing Date.
(E) "Tax" means any federal, state, local, or foreign income, gross
receipts, ad valorem, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A), customs duties, capital stock, net worth, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
workers compensation, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever imposed by any federal, state, local or foreign government
or any agency or political subdivision of any such government, including any
interest, penalty, or addition thereto, without regard to whether such tax is
disputed or not or arose before, on or after the Closing Date.
(F) "Tax Returns" means all reports, elections, declarations, claims
for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(G) "Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction, having or purporting to have jurisdiction with respect to any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall have the STOCKHOLDERS released
from any and all guarantees on any obligations of the COMPANY that they
personally guaranteed for the benefit of the COMPANY (including the COMPANY's
Subsidiaries), with all such guarantees on indebtedness being assumed by URSI.
URSI agrees to indemnify the STOCKHOLDERS against any and all claims made by
lenders under such guarantee which arise as a result of URSI's failure to cause
such guarantee to be released on or prior to the Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify
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under Section 401(a) of the Code and makes contributions to such plan at or
above the level stated in Schedule 10.9, or (ii) in the case of each other Plan,
URSI establishes a replacement Plan providing equivalent or better benefits,
provided that if the cost of providing equivalent benefits should, in the good
faith judgment of URSI, become commercially unreasonable, the replacement plan
established by URSI may have benefits that are, in the good faith judgment of
URSI, as close to equivalent as can be obtained at commercially reasonable cost.
There are no intended third party beneficiaries of this Section 10.9, and after
the Closing Date it can be waived or modified by URSI and STOCKHOLDERS (or their
successors) shown as owning two-thirds of COMPANY Stock on Annex II.
10.10 Option. STOCKHOLDER intends to seek to obtain the award of the
towing and recovery contract for the Los Angeles Police Department Hollenbeck
division and/or Central Division, and their respective boundaries, for Official
Police Garage work. STOCKHOLDER will form a corporation ("OPGCO") to hold such
contract. For the period beginning eighteen (18) months after and ending three
(3) years after the Closing Date, URSI will have an option (the "URSI Option")
to purchase from STOCKHOLDER all of the issued and outstanding shares of capital
stock of OPGCO for an amount equal to the greater of (i) $1,000,000 or (ii) the
product of thirteen (13) times the aggregate pro forma after-tax net income
(determined as if OPGCO were a tax-paying "C" corporation for federal and state
income tax purposes) of OPGCO for the then most recent 12-month period,
determined in accordance with generally accepted accounting principles as
certified by URSI's independent public accounting firm. STOCKHOLDER further
agrees with URSI that:
(A) Prior to the termination of the URSI Option, he will not sell or
transfer any of his shares of capital stock of OPGCO to any party other than
URSI and that he will cause OPGCO not to issue any shares of its capital stock
prior to the termination of the URSI Option to any person other than himself.
(B) Within thirty (30) days of URSI's request, he will cause OPGCO
to provide URSI with financial statements showing the results of operations for,
and financial condition as of the end of, the most recent 3-month and/or
12-month periods ending prior to such request. URSI shall have the right, at its
expense, to cause its independent accountants to conduct an audit of OPGCO's
financial statements for any 12-month period ending prior to the termination of
the URSI Option.
(C) All certificates for shares of stock of OPGCO capital stock will
bear the following legend: "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO AN OPTION IN FAVOR OF UNITED ROAD SERVICES, INC., 8 AUTOMATION
LANE, ALBANY, NY 12205."
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If URSI exercises the URSI Option, then STOCKHOLDER and URSI shall
enter into a purchase agreement containing, to the extent relevant,
substantially the same representations and warranties and indemnification
provisions as are provided by the parties in this Agreement and shall cooperate
to consummate such transaction within 30 days of URSI's exercise of the URSI
Option.
Upon OPGCO's receipt of the contract for Official Police Garage
Work, STOCKHOLDER shall have the option for a period of 60 days to purchase the
COMPANY's 1997 International Vulcan Wrecker for a cash purchase price of
$22,500.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except with respect to
Sections 5.30 through 5.32, which shall be several), will indemnify, defend,
protect and hold harmless URSI, the COMPANY and the Surviving Corporation at all
times from and after the date of this Agreement until the Expiration Date as
defined in Section 5 above, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by URSI, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith (other than the
representations and warranties provided in Section 5.22, for which Section 11.6
provides special indemnity provisions); (ii) any nonfulfillment of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, (x) arising out of or based upon any
untrue statement of a material fact relating to the COMPANY (including the
COMPANY's Subsidiaries) or the STOCKHOLDERS that is provided to URSI or its
counsel by the COMPANY or the STOCKHOLDERS and contained in any preliminary
prospectus relating to the IPO, the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or (y)
arising out of or based upon any omission to state therein a material fact
relating to the COMPANY (including the COMPANY's Subsidiaries) or the
STOCKHOLDERS that is required to be stated therein or necessary to make the
statements therein not misleading, and not provided to URSI or its counsel by
the COMPANY or the STOCKHOLDERS, provided, however, that such
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indemnity shall not inure to the benefit of URSI, the COMPANY or the Surviving
Corporation to the extent that such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to URSI counsel and to URSI for inclusion in the final prospectus,
and such information was not so included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the
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Indemnifying Party shall not settle any criminal proceeding without the consent
of the Indemnified Party. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. All Indemnified Parties shall use the same counsel, which shall be the
counsel selected by Indemnifying Party, provided that if such counsel shall have
a conflict of interest that prevents such counsel from representing Indemnified
Party, Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel. After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses. If the Indemnifying Party
desires to accept a final and complete settlement of any such Third Person claim
and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person and the Indemnified Party shall reimburse the Indemnifying Party
for any additional costs of defense which it subsequently incurs with respect to
such claim and all additional costs of settlement or judgment. If the
Indemnifying Party does not undertake to defend such matter as to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for any Tax benefits, Tax detriments or
insurance proceeds in determining the amount of any indemnification obligation
under this Section,
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provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy. All indemnification payments
under this Section shall be deemed adjustments to the Merger consideration
provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement unless this Agreement is terminated prior to the Closing
Date, in which event the Indemnification Threshold is an amount equal to two
percent (2%) of the Minimum Value set forth in Annex I. All such amounts
otherwise payable by one or more STOCKHOLDERS in excess of the amount so offset
and reduced shall be paid without offset or reduction pursuant to this Section
11.5(i). This Section 11.5(i) shall not apply to amounts payable pursuant to
Section 11.6. For purposes of determining the Indemnification Threshold, the
URSI Stock shall be valued at the initial price of the URSI Stock sold to the
public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no
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event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the amount of the proceeds received by
such STOCKHOLDER pursuant to this Agreement, calculated as provided in Section
11.5(iv), with respect to Specially Limited Claims. Specially Limited Claims are
all claims that may be made pursuant to this Agreement, including this Section
11, except claims based on (a) breach of representations and warranties in
Section 5.13, (b) breach of representations and warranties in Section 5.19 or
Section 5.20 or (c) Section 11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the amount of proceeds received by such
STOCKHOLDER pursuant to this Agreement. The amount of proceeds received by each
STOCKHOLDER shall be calculated (for purposes of Section 11.5(iii) and this
Section 11.5(iv)) by adding (a) the cash proceeds paid to such STOCKHOLDER
pursuant to Section 2.2 hereof prior to the date that the indemnity obligation
of such STOCKHOLDER is paid, plus (b) the net proceeds to such STOCKHOLDER from
the sale of such STOCKHOLDER's URSI Stock received pursuant to Section 2.2
hereof prior to the date that the indemnity obligation of such STOCKHOLDER is
paid, plus (c) the Fair Market Value (as defined in Annex I) of the unsold
shares of URSI Stock received by such STOCKHOLDER pursuant to Section 2.2 prior
to the date that the indemnity obligation of such STOCKHOLDER is paid, valued on
the trading day prior to the day the indemnification obligation is paid.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first
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been provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and all Taxes
(including without limitation any obligation to contribute to the payment of, or
be entitled to share in the refund of, a Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that includes
or included the COMPANY or any Acquired Party) which are (i) imposed on any
member (other than the COMPANY or any Acquired Party) of the consolidated,
unitary or combined group which includes or included the COMPANY or any Acquired
Party or (ii) imposed on the COMPANY or any Acquired Party in respect of its
income, business, property or operations or for which the COMPANY or any
Acquired Party may otherwise be liable (A) for any Pre-Closing Period, (B)
resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to any items of income or gain of an
entity treated as a partnership reported by the COMPANY or any Acquired Party as
a partner, to the extent such items are properly attributable
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to periods of the "partnership" ending on or before the Closing Date, or (G)
attributable to any discharge of indebtedness that may result from any capital
contributions by STOCKHOLDERS (or an affiliate of STOCKHOLDERS) to the COMPANY
or any Acquired Party of any intercompany indebtedness owed by COMPANY to any
STOCKHOLDER (or an affiliate of any STOCKHOLDER), but, in each case, only to the
extent such Taxes or the entitlement to such refund are not reflected on the
applicable Company Financial Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv), Section 5.22(xxv) or Section 5.22(xxvi) and (y)
any liability imposed on URSI, the COMPANY and any Acquired Party (or any
affiliate of such companies) attributable to any breach of a warranty or
representation made by STOCKHOLDERS in Section 5.22, excluding Section 5.22(xx),
Section 5.22(xxiv), Section 5.22(xxv) and Section 5.22(xxvi).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party with respect to any
Post-Closing Period and (y) any liability imposed on STOCKHOLDERS attributable
to any breach of a warranty or representation made by URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this
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Section 11.6, then the contest provisions of Section 11.7, as applicable, shall
control regarding the defense and handling of any such third-party claim that
could give rise to an indemnification obligation on the part of one party to
another. In addition, and notwithstanding anything else in Article 11 to the
contrary, the party with the right to control a contest has the right to choose
counsel of its choice regarding such contest. Furthermore, there shall be no
limit on (i) the time period during which a claim for indemnification may be
made under this Section 11.6 or (ii) the minimum or maximum amount of indemnity
payments that may be recovered pursuant to this Section 11.6 (other than (x)
each party's obligation to make claims for indemnification promptly and without
undue delay and (y) the aggregate limit for all indemnity payments imposed on a
STOCKHOLDER provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the
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COMPANY (including any Acquired Party), and URSI and the COMPANY (including any
Acquired Party) shall execute or cause to be executed any power of attorney or
other document or take such actions as requested by the STOCKHOLDERS to enable
the STOCKHOLDERS to take any action STOCKHOLDERS deem appropriate with respect
to any proceedings relating thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre- Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due
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and timely performance of any of the covenants, agreements or conditions
contained herein, and such default shall not have been cured and shall not
reasonably be expected to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
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(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the
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foregoing covenant may be enforced by URSI, in the event of breach by such
STOCKHOLDER, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations under this
Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of
this Section 13 if URSI and/or any subsidiary thereof shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against URSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
URSI of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in this Section 13 shall not be affected by any breach of any other
provision hereof by any party
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hereto, except that upon URSI's admission in writing, or a final judicial
determination which is not the subject of appeal or further appeal by URSI, that
URSI has materially breached a STOCKHOLDER's Employment Agreement (if
applicable), right to have URSI Stock registered under the 1933 Act pursuant to
Section 17.1 or 17.2, or right to receive contingent consideration as provided
in section C of Annex I, and URSI's failure to cure such material breach within
30 days of such admission or final judicial determination, whichever is
applicable, then the covenants contained in this Section 13 with respect to such
STOCKHOLDER will expire. The covenants contained in this Section 13 shall have
no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under color of law, provided that prior
to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS
shall, if possible, give prior written notice thereof to URSI and provide URSI
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this section,
URSI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting URSI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
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14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. Upon termination of this Agreement prior to the Closing Date
for any reason other than the material breach or default of any STOCKHOLDER or
COMPANY, URSI will return to COMPANY all documents containing confidential
information of COMPANY that were provided to URSI by COMPANY or STOCKHOLDERS and
all summaries, abstractions, projections, pro formas or like material prepared
by URSI incorporating such confidential information. In the event of a breach or
threatened breach by URSI of the provisions of this section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining URSI from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
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15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as URSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel) by the terms
and conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which
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a majority of the interests therein by value is owned by the STOCKHOLDER and
members of the STOCKHOLDER's family, and (y) which is and continues to be
controlled by the STOCKHOLDER and members of the STOCKHOLDER'S family for the
period set forth in Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
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condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests, provided that URSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to URSI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a reorganization described in Section 368(a)(1)(A)
of the Code. In addition, if URSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than URSI is greater than the number of
such shares which can be offered without adversely affecting the offering, URSI
may reduce the number of shares offered for the accounts of such persons to a
number deemed satisfactory by such managing underwriter, provided that such
reduction shall be made first by reducing the number of shares to be sold by
persons other than URSI, the stockholders named on Annex III hereto, the
stockholders of the Founding Companies, and any person or persons who have
required such registration pursuant to "demand" registration rights granted by
URSI; thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of URSI Stock owned by such stockholder
immediately after the Closing, provided that if any stockholder does not wish to
sell all shares such stockholder is permitted to sell, the opportunity to sell
additional shares shall be reallocated in the same manner to those stockholders
named in Annex III hereto and stockholders of the Founding Companies who wish to
sell more shares until no more shares can be sold by such stockholders.
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17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to indemnify
URSI pursuant to Section 11 herein, and the amount of the indemnification
obligation exceeds the amount of cash such STOCKHOLDER received from URSI on the
date of the IPO plus the net proceeds received by such STOCKHOLDER from sales of
URSI Stock received pursuant to Section 2.2 hereof prior to the time such claim
is paid, such STOCKHOLDER
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may request in writing that URSI file a registration statement under the 1933
Act requesting such number of such STOCKHOLDER's shares of URSI Stock as is
required to be sold to pay the difference between the cash proceeds and the
amount of the indemnification obligation, plus legal and other expenses,
including expenses of the offering, provided arrangements are made to URSI's
reasonable satisfaction that the proceeds will be used solely for the purpose of
such indemnification and the payment of related expenses and that arrangements
are made to the reasonable satisfaction of URSI that the proceeds of such sale
will be used solely for the purpose of such indemnification and the payment of
related expenses, and that no such request may be made until after one hundred
eighty (180) days following the Closing Date without the consent of the managing
underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
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17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the Pre-
Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be
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modified or amended only by a written instrument executed by the STOCKHOLDERS,
the COMPANY and URSI, acting through their respective officers, duly authorized
by their respective Boards of Directors. Any disclosure made on any Schedule
delivered pursuant hereto shall be deemed to have been disclosed for purposes of
any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the STOCKHOLDERS and incurred
prior to the Pricing Date may be paid from COMPANY funds rather than from
personal funds of the STOCKHOLDERS, provided that the STOCKHOLDERS provide to
URSI, prior to the Pricing Date, a detailed statement setting forth the type and
amount of all such fees, expenses or disbursements so paid, and, provided
further, that the aggregate
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amount of same shall be deducted, on a dollar-for-dollar basis, from the amount
of cash into which the COMPANY Stock shall be converted pursuant to Section 2.2
hereof. Notwithstanding the foregoing provisions of Section 18.6, URSI shall
further pay or reimburse reasonable costs of counsel or co-counsel for the
Company if and to the extent so mutually agreed in advance between URSI and such
counsel, in circumstances where URSI believes it obtained or may have obtained a
material benefit, in light of market conditions and other factors, by reason of
such counsel or co-counsel expediting the transaction which is the subject of
this Agreement and reducing the time required to complete this Agreement and the
Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(A) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(B) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(C) If mailed to the COMPANY, addressed to it at:
Absolute Towing & Transporting, Inc.
7245 Laurel Canyon Blvd.
North Hollywood, CA 91605
Attn: Todd Smart
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and marked "Personal and Confidential" with copies to:
Michael Wofford, Esq.
Clark & Trevithick
800 Wilshire Blvd.
12th Floor
Los Angeles, CA 90017
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the
California state court of general jurisdiction in Los Angeles County, California
(or, if there is federal jurisdiction, then the exclusive jurisdiction and venue
of the United States District Court having jurisdiction over Los Angeles
County). The parties hereby consent to the personal and exclusive jurisdiction
and venue of said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
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single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
By
- -------------------------- --------------------------
Name:
Title:
WITNESS: STOCKHOLDERS:
- -------------------------- --------------------------
Todd Smart
ABSOLUTE TOWING &
TRANSPORTING, INC.
WITNESS:
By
- -------------------------- --------------------------
Name:
Title:
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ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
ABSOLUTE TOWING & TRANSPORTING, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $3,567,200 in cash.
2. 297,267 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $7,134,400.
4. STOCKHOLDERS and the COMPANY will not be obligated to
consummate the Merger if the aggregate value of cash and URSI Stock (valued at
the IPO initial public offering price) is less than the Minimum Value of
$6,688,503.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
Todd Smart 297,267 $3,567,200
------------ ---------
TOTALS: 297,267 $3,567,200
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 1 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 1 Payout Date.
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b. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
c. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
d. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
e. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 2 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date.
b. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
c. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
d. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 3 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date.
b. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
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c. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
4. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 4 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date.
b. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 5 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 5 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the revenues reported by URSI
for a fiscal year that are generated by operations acquired by URSI by means of
the Merger and revenues generated from any new facilities established by URSI
primarily for the purpose of providing service to Insurance Auto Auctions,
provided that revenues reported by URSI for fiscal year 1998 will be adjusted to
reflect revenues of COMPANY from January 1, 1998 until the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year 1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year 1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year 2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year 2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year 2002.
g. "Year 1 Target Revenues" means $5,257,891.
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h. "Year 2 Target Revenues" means the greater of (i) 110% of Year 1
Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of Year 2
Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of Year 3
Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of Year 4
Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year 1
Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are equal
to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year 2
Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are equal
to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year 3
Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are equal
to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year 4
Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are equal
to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year 5
Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are equal
to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI announces
its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2000.
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t. "Year 4 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues, including
without limitation decisions regarding the allocation and non- allocation of
capital and other resources, decisions regarding business that will be accepted
or rejected, personnel decisions including decisions to lay off employees, and
decisions to shut down or downsize operations, all without making any offsetting
adjustments to Revenues or contingent consideration, provided only that such
decisions are made in a good faith effort to maximize total return to the
shareholders of URSI to the extent that the same can be realized without undue
risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired by URSI by
means of the Merger are sold, a reasonable adjustment will be made to these
provisions so that the contingent consideration paid to STOCKHOLDERS will be
approximately the same as it would have been if the fiscal year had not been
changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock to be
paid as contingent consideration, URSI Stock will be valued at Fair Market Value
as of the trading day the day before the contingent consideration is paid. "Fair
Market Value" of the URSI Stock as of a date means the market price per share of
such Shares determined by the Board of Directors of URSI as follows: (a) if the
URSI Stock is traded on a stock exchange on the date in question, then the Fair
Market Value will be equal to the closing price reported by the applicable
composite-transactions report for such date; (b) if the URSI Stock is traded
over-the-counter on the date in question and is classified as a national market
issue, then the Fair Market Value will be equal to the last- transaction price
quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
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11. Despite anything to the contrary in this Annex I or elsewhere in the
Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS as
contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or the
number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
13. The right to be paid contingent consideration is personal and cannot
be assigned by any STOCKHOLDER without the consent of URSI except upon the death
of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon any
STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
Todd Smart 100%
----
Total: 100%
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Part II
Aggregate fixed consideration to be paid to the stockholders of
each Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,850 50% 50%
Keystone Towing,
Inc. 377,624 50% 50%
Northland Auto
Transporters, Inc. 588,435 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,456,098
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
KEYSTONE TOWING, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
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1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of
Directors of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital
Stock of the COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 3
2.1 Manner of Conversion 3
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES OF URSI STOCK 4
4. PRE-CLOSING AND CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 8
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 10
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and
Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
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Page
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5.18 Compensation; Employment Agreements 14
5.19 Employee Plans 14
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 19
5.23 No Violations 23
5.24 Government Contracts 23
5.25 Absence of Changes 24
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 25
5.28 Relations with Governments 25
5.29 Disclosure 26
(B) Representations and Warranties of STOCKHOLDERS 26
5.30 Authority; Ownership 26
5.31 Preemptive Rights 26
5.32 No Intention to Dispose of URSI Stock 27
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 27
6.2 URSI Stock 27
6.3 Validity of Obligations 28
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI
STOCK 28
6.7 No Side Agreements 29
6.8 Subsidiaries 29
6.9 Business; Real Property; Material Agreements;
Financial Information 29
6.10 Conformity with Law 30
6.11 No Violations 30
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 32
7.3 Prohibited Activities 33
7.4 No Shop 35
7.5 Notice to Bargaining Agents 35
7.6 Termination of Plans 35
7.7 URSI Prohibited Activities 35
7.8 Notification of Certain Matters 36
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Page
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7.9 Amendment of Schedules 36
7.10 Cooperation in Preparation of Registration Statement 37
7.11 Examination of Final Financial Statements 38
7.12 Loan 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY 38
8.1 Representations and Warranties; Performance of
Obligations 38
8.2 Satisfaction 38
8.3 No Litigation 39
8.4 Stockholders' Release 39
8.5 Opinion of Counsel 39
8.6 Director Indemnification 39
8.7 Registration Statement 40
8.8 Consents and Approvals 40
8.9 Good Standing Certificates 40
8.10 No Waivers 40
8.11 No Material Adverse Change 40
8.12 Transfer Restrictions 40
8.13 Employment Agreements, Consulting Agreements, Leases
and Cosale Agreement 41
8.14 Tax Opinion 41
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 41
9.1 Representations and Warranties; Performance of
Obligations 41
9.2 No Litigation 41
9.3 Examination of Final Financial Statements 42
9.4 No Material Adverse Effect 42
9.5 STOCKHOLDERS' Release 42
9.6 Satisfaction 42
9.7 Termination of Related Party Agreements 42
9.8 Opinion of Counsel 42
9.9 Consents and Approvals 42
9.10 Good Standing Certificates 43
9.11 Registration Statement 43
9.12 Employment Agreements, Consulting Agreements
and Leases 43
9.13 Repayment of Indebtedness 43
9.14 FIRPTA Certificate 44
9.15 Insurance 44
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Page
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10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS 44
10.1 Preservation of Tax and Accounting Treatment 44
10.2 Disclosure 44
10.3 Cooperation in Tax Return Preparation 45
10.4 Tax Return Preparation and Filing 45
10.5 Reorganization Status Information Reporting 46
10.6 Special Definitions Relating to Tax Matters 46
10.7 Directors 47
10.8 Release from Guarantees 47
10.9 Preservation of Plans 47
10.10 Option 48
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS
and the Boxwells 49
11.2 Indemnification by URSI 50
11.3 Third Person Claims 50
11.4 Exclusive Remedy 52
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 54
11.7 Special Contest Rights Related to Tax Matters 56
11.8 Special Notification Requirements Regarding Tax
Dispute 57
11.9 Refunds 57
11.10 Optional Payment with Shares 57
12. TERMINATION OF AGREEMENT 57
12.1 Termination 57
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements 58
13. NONCOMPETITION 59
13.1 Prohibited Activities 59
13.2 Damages 60
13.3 Reasonable Restraint 60
13.4 Severability; Reformation 60
13.5 Independent Covenant 60
13.6 Materiality 61
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Page
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 61
14.1 STOCKHOLDERS 61
14.2 URSI 62
14.3 Damages 62
14.4 Survival 63
15. TRANSFER RESTRICTIONS 63
15.1 Transfer Restrictions 63
15.2 Permitted Transferees 63
16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 64
16.2 Accredited Investors; Economic Risk;
Sophistication 64
17. REGISTRATION RIGHTS 65
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 66
17.3 Registration Procedures 67
17.4 Underwriting Agreement 67
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 68
18. GENERAL 68
18.1 Cooperation 68
18.2 Successors and Assigns 68
18.3 Entire Agreement 68
18.4 Counterparts 69
18.5 Brokers and Agents 69
18.6 Expenses 69
18.7 Notices 70
18.8 Governing Law; Forum 71
18.9 Survival of Representations and Warranties 71
18.10 Exercise of Rights and Remedies 72
18.11 Time 72
18.12 Reformation and Severability 72
18.13 Remedies Cumulative 72
18.14 Captions 72
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<PAGE>
SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
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<PAGE>
Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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<PAGE>
TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
Material Documents 5.23
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<PAGE>
Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), KEYSTONE TOWING, INC., a California corporation
(the "COMPANY"), and the stockholders listed on Annex II (the "STOCKHOLDERS").
The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., ASC Transportation Services, Caron Auto Brokers, Inc., Caron
Auto Works, Inc., Falcon Towing and Auto Delivery, Inc., Northland Auto
Transporters, Inc., Northland Fleet Leasing Company, Silver State Tow &
Recovery, Inc. and Smith-Christensen Enterprises, Inc. (the "Other Companies")
in order to acquire additional vehicle towing and transport companies (the Other
Companies, together with the COMPANY, are collectively referred to herein as the
"Founding Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
State of the State of Delaware and, if required, the Articles of Merger or a
similar document to be signed, verified and filed with the relevant authorities
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<PAGE>
in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 100,000 shares of common stock, ("COMPANY Stock"), of
which 10,000 shares are issued and outstanding; and
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(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
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(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of URSI Stock and the
amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as
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set forth in Section 2.2, notwithstanding the number of shares of COMPANY Stock
such certificates represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of URSI
Stock, and the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger, shall occur and be deemed to be completed. If so
requested by any STOCKHOLDER at or prior to the Pre-Closing, URSI will use its
best efforts to cause all cash to be paid to such STOCKHOLDER on the CLOSING
DATE to be paid by the Underwriters (as defined in Section 5.29) by initiating a
wire transfer payment pursuant to instructions included in STOCKHOLDER's
request. After the Pre-Closing and until the Closing Date, no party may
withdraw, terminate or rescind any
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delivery made at the Pre-Closing unless this Agreement is terminated as provided
in Section 12. All documents delivered at the Pre-Closing shall be held by
Howard Rice for final delivery on the Closing Date as directed by the parties
and their counsel at the Pre-Closing, provided only that the Articles of Merger
and any similar document may be filed to become effective on the Closing Date.
Should the Agreement be terminated as provided in Section 12 prior to the
Closing Date, the parties shall take all steps necessary to rescind any such
filings, Howard Rice shall return all documents delivered at the Pre-Closing to
the parties who delivered the same, all such deliveries at the Pre-Closing will
be rescinded and a nullity, the Merger shall not become effective, the shares of
COMPANY Stock will not be converted into URSI Stock, and shares of URSI Stock
will not be delivered to STOCKHOLDERS. The documents delivered at Pre-Closing
shall include documents required to rescind, prior to the Closing Date, any
filing of the Articles of Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
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5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and the COMPANY's Subsidiaries, taken as a whole (a "Material
Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in which the
COMPANY is authorized or qualified to do business. True, complete and correct
copies of the Certificate of Incorporation and Bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the "Charter
Documents"), certified by the Secretary or Assistant Secretary of the COMPANY,
are all attached hereto as Schedule 5.1. A true, complete and correct copy of
each Certificate of Incorporation included in the Charter Documents, certified
by the Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind. All
of the issued and outstanding shares of the capital stock of the COMPANY have
been duly authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the STOCKHOLDERS and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder.
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5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY
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("Affiliates") other than in the ordinary course of business, within the
preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's Balance Sheet as of December 31, 1997 and 1996 and
Statements of Operations, Cash Flows and Retained Earnings for each of the years
in the two-year period ended December 31, 1997 (December 31, 1997 being
hereinafter referred to as the "Balance Sheet Date"). Such Financial Statements
have been prepared in accordance with KPMG Peat Marwick LLP's interpretation of
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted). Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present
fairly the financial position of the COMPANY (and each of the COMPANY's
Subsidiaries on a consolidated basis) as of the dates indicated thereon, and
such Statements of Operations, Cash Flows and Retained Earnings present fairly
the results of their respective operations for the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such
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balance sheet were being prepared immediately prior to Closing or if such
liabilities represent liabilities of the nature described in Section 5.13,
Section 5.20 and/or Section 5.22 (excluding items subject to any knowledge
qualifications contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the
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amount shown on Schedule 5.11, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or
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Hazardous Substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the COMPANY
or any of the COMPANY's Subsidiaries where Solid Wastes, Hazardous Wastes or
Hazardous Substances have been treated, stored, used, disposed of or otherwise
handled; (iii) there have been no releases (as defined in Environmental Laws)
at, from, under, in or on any property owned or operated by the COMPANY or any
of the COMPANY's Subsidiaries except as permitted by Environmental Laws; (iv) to
the knowledge of the COMPANY there is no on-site or off-site location to which
the COMPANY or any of the COMPANY's Subsidiaries has transported or disposed of
Solid Wastes, Hazardous Wastes or Hazardous Substances or arranged for the
transportation of Solid Wastes, Hazardous Wastes or Hazardous Substances, which
site is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
any of the COMPANY's Subsidiaries or URSI for any clean-up cost, remedial work,
damage to natural resources or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) to the knowledge of the COMPANY the
COMPANY has no contingent liability in connection with any release of any Solid
Waste, Hazardous Waste or Hazardous Substance into the environment. Schedule
5.13 lists all releases of Hazardous Wastes or Hazardous Substances by the
COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500, including in the case of
(z) true, complete and correct copies of all such leases and including in cases
(x), (y) and (z) an indication as to which real and personal property is
currently owned, or was formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as shown on Schedule 5.14, all
of the trucks and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedule 5.14 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.14 are in full force and effect and constitute valid and binding agreements on
the COMPANY (or a COMPANY Subsidiary, as applicable), and to the knowledge of
the COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their respective
terms. All fixed assets used by the COMPANY and the COMPANY's Subsidiaries that
are material to the
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operation of their respective businesses are either owned by the COMPANY or the
COMPANY's Subsidiaries or leased under an agreement indicated on Schedule 5.14.
Schedule 5.14 shall, without limitation, contain true, complete and correct
copies of all title reports and title insurance policies received or owned by
the COMPANY or the COMPANY's Subsidiaries. The COMPANY has also provided in
Schedule 5.14 a summary description of all plans or projects which have been
memorialized in any written or electronic document or file and involves the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, with respect to which the
COMPANY (or any of the COMPANY's Subsidiaries) has made any expenditure in the
two-year period prior to the date of the Agreement in excess of $10,000, or
which if pursued by the COMPANY (or such Subsidiary) would require additional
expenditures of capital in excess of $10,000. Except as set forth on Schedule
5.14 and except for liens excepted in Section 7.3(vi)(1) and (3), there are no
liens against the COMPANY's properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
leases, liens, pledges or other security agreements) (a) as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to URSI, except
that leases set forth on Schedule 5.14 need not be set forth on Schedule 5.15.
Except to the extent set forth on Schedule 5.15, (i) none of the COMPANY's
(including the COMPANY's Subsidiaries) significant customers has cancelled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel any Material Contract or substantially
reduce utilization of the services provided by the COMPANY (including the
COMPANY's Subsidiaries), and (ii) the COMPANY and the COMPANY's Subsidiaries
have complied with all material commitments and obligations pertaining to any
Material Contract, and are not in default under any such Material Contract, and
no notice of default has been received, and no Stockholder or any affiliate of
any Stockholder is a party to any such Material Contract. Except as set
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forth in Schedule 5.15, the COMPANY and the COMPANY's Subsidiaries have not been
the subject of any election in respect of union representation of employees and
are not bound by or subject to (and none of its respective assets or properties
is bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.15, no employees of the COMPANY or its Subsidiaries are
represented by any labor union or covered by any collective bargaining agreement
and no campaign to establish such representation has ever occurred or is in
progress. There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries) and any
group of its employees, nor has the COMPANY (including the COMPANY's
Subsidiaries) experienced any labor interruptions over the past three years, and
the COMPANY considers its relationship with employees to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
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plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
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(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any
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withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
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(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
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(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect
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timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the
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meaning of Section 168 of the Code. No Acquired Party is a party to any "safe
harbor lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to
any "long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-Closing
Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of
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the transaction. Moreover, shares of COMPANY Stock and shares of URSI Stock held
by STOCKHOLDERS and otherwise sold, redeemed, or disposed of on or after January
1, 1997, including after the Closing Date, will be considered in making this
representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any
STOCKHOLDER-employees of the COMPANY will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not
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exceed 7.5% of the aggregate consideration to be received by such STOCKHOLDERS
pursuant to the Merger.
(xxvi) The fair market value of the sum of (i) all dividends paid
and distributions made on or after January 1, 1997 and through the Closing Date
in respect of COMPANY Stock and (ii) all consideration paid by the COMPANY on or
after January 1, 1997 and through the Closing Date in connection with all direct
and indirect redemptions, purchases and other acquisitions of COMPANY Stock is
no greater than $380,836.
(xxvii) The COMPANY made an election to be classified as an S
Corporation for its taxable year beginning on January 1, 1993 under Section
1362(a) of the Code and corresponding provisions of the laws of the state in
which it is subject to tax, and has qualified as an S Corporation at all times
since such date. The Company does not own any subsidiary which is a qualified
Subchapter S subsidiary within the meaning of Section 1361(b)(3) of the Code.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
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5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
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(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the
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COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended or any law of similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or
associated with the COMPANY for any failure of the Registration Statement to
become effective, or of the IPO to occur at a particular price or within a
particular range of prices or to occur at all; and (iii) the decision of
STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent to
the proposed Merger, has been made independent of, and without reliance upon,
any statements, opinions or other communications of, or due diligence
investigations which have been or will be made or performed by any prospective
Underwriter, relative to URSI or the prospective IPO. The Underwriters shall
have no obligation to the STOCKHOLDERS with respect to any disclosure contained
in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
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5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
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6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options,
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warrants, equity securities, calls, rights, commitments or agreements of any
character to which URSI or any of its subsidiaries are a party or by which they
are bound obligating URSI or any of its subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock of
URSI or any of its subsidiaries or obligating URSI or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement. To the knowledge of URSI,
as of the Closing Date, none of the STOCKHOLDERS set forth on Annex III will be
a party to or subject to any voting trust, proxy or other agreement or
understanding with respect to the shares of capital stock of URSI owned by such
STOCKHOLDER. All of the shares of URSI Stock to be issued to the STOCKHOLDERS in
accordance herewith will be duly authorized, validly issued, fully paid and
nonassessable. All of the shares of URSI Stock issued to persons set forth on
Annex III and, based on the representations of STOCKHOLDERS contained in this
Agreement and in the documents delivered to URSI pursuant hereto, to
STOCKHOLDERS pursuant to this Agreement, were or will be offered, issued, sold
and delivered by URSI in compliance with all applicable state and federal laws
concerning the issuance of securities and none of such shares were or will be
issued in violation of the preemptive rights of any past or present stockholder.
On the Closing Date the capitalization of URSI will be as set forth in the
Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any
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other agreement, except as listed on Schedule 6.9(a) and except that URSI is a
party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement. URSI
was formed in 1997, and has historical financial statements only for the year
ended December 31, 1997. Attached hereto as Schedule 6.9(b) are URSI's audited
historical financial statements for the year ended December 31, 1997. Such URSI
financial statements have been prepared in accordance with generally accepted
accounting principles and present fairly the financial position of URSI as of
the dates indicated thereon, and such financial statements present fairly the
results of their respective operations for the periods indicated thereon. URSI
has no material liabilities, accrued or contingent, other than those incurred in
connection with this Agreement, the Other Agreements and the contemplated IPO of
URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. URSI (including URSI's Subsidiaries)
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a URSI Material Adverse Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter
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Documents. Except as set forth on Schedule 6.11, none of the URSI Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. The minute books
of URSI and each of URSI's subsidiaries as heretofore made available to the
COMPANY are true and correct.
6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY after the Merger will be separate consideration for, or allocable
to, any of their shares of the COMPANY; none of the shares of URSI Stock
received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
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(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Founding Companies other than the COMPANY as confidential in
accordance with the provisions of Section 14 hereof. In addition, URSI will
cause each of the Founding Companies other than the COMPANY to enter into a
provision similar to this Section 7.1 requiring each such Founding Company to
keep confidential any information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
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(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
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make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely
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affect the Tax liability of the Company or any Acquired Party (or URSI following
the Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
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(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-
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Closing, unless such Schedule is to be amended to reflect an event occurring
other than in the ordinary course of business. In the event that the COMPANY
amends or supplements a Schedule pursuant to this Section 7.9, and URSI and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In
the event that URSI amends or supplements a Schedule pursuant to this Section
7.9 and COMPANY and a majority of the Founding Companies do not consent to the
effectiveness of such amendment or supplement at or before the Pre-Closing, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 7.9. In the event
that one of the other Founding Companies amends or supplements a Schedule
pursuant to Section 7.9 of one of the Other Agreements, URSI shall give the
COMPANY notice promptly after it has knowledge thereof. If URSI, COMPANY and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. For
purposes of this Section 7.9, URSI shall be deemed to have given its consent to
the effectiveness of any amendment or supplement to a Schedule if URSI does not
notify COMPANY of its disapproval within 48 hours after URSI is notified of such
amendment or supplement, and COMPANY and each other Founding Company shall be
deemed to have given its consent to the effectiveness of any amendment or
supplement to a Schedule if COMPANY or such other Founding Company, as
applicable, does not notify URSI of its disapproval within 48 hours after
COMPANY or such other Founding Company, as applicable, is notified of such
amendment or supplement. Except as otherwise provided herein, no amendment of or
supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the
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STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
financial statements of the COMPANY for any quarter subsequent to December 31,
1997 are required to be included in the Registration Statement, the COMPANY
shall provide, and URSI shall have had sufficient time to review, the unaudited
balance sheet and statements of income, cash flows and retained earnings of the
COMPANY as of the end of such quarter, disclosing no Material Adverse Change in
the financial condition or results of operations of the COMPANY. Such financial
statements, which shall be deemed to be Financial Statements (as described in
Section 5.9), shall have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted therein). To the extent such Financial Statements
shall be included or reflected in the Registration Statement, any events or
circumstances reflected therein which might constitute a Material Adverse Effect
with respect to the COMPANY shall be deemed to have been waived by URSI and URSI
shall have no rights in respect of such Material Adverse Effect.
7.12 Loan. If the Merger has not occurred prior to April 10, 1998, on such
date URSI will loan $30,000 to STOCKHOLDER, which loan shall be repaid upon
consummation of the Merger.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
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8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced prior to the initial filing
with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
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8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
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8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body
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shall have taken any other action or made any request of URSI as a result of
which the management of URSI deems it inadvisable to proceed with the
transactions hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY for the fiscal quarters beginning after the Balance Sheet
Date, and the unaudited consolidated statement of income, cash flows and
retained earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no material adverse change in the financial
condition of the COMPANY or the results of its operations from the financial
statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Clark &
Trevithick, counsel to the COMPANY and the STOCKHOLDERS, dated the Pricing Date,
in the form annexed hereto as Annex VI, and the Underwriters shall have received
a copy of the same opinion addressed to them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
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transactions contemplated herein shall have been obtained and made; the COMPANY
shall have obtained and delivered to URSI such additional consents to the Merger
as URSI may reasonably request including, without limitation, URSI's receipt on
or prior to the Pricing Date of those licenses, franchises, permits or
governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
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9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
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the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to
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period and (b) prepare such Tax Returns in a manner consistent with prior years,
in each case as determined in the good faith judgment of the preparer of such
returns; provided, however, that in all events such Tax Returns shall be
prepared in a manner consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(b) "Interim Period" shall mean any taxable period commencing
prior to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period
that begins before the Closing Date and ends on or before the Closing Date and
(ii) the portion of any Interim Period through and including the Closing Date.
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(d) "Post-Closing Period" means any taxable period that begins
after the Closing Date, and, with respect to any Interim Period, the portion of
such Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income,
gross receipts, ad valorem, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A), customs duties, capital stock, net worth, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, workers compensation, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government,
including any interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations,
claims for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, having or purporting to have jurisdiction with respect to
any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall have the STOCKHOLDERS released
from any and all guarantees on any obligations of the COMPANY that they
personally guaranteed for the benefit of the COMPANY (including the COMPANY's
Subsidiaries), with all such guarantees on indebtedness being assumed by URSI.
URSI agrees to indemnify the STOCKHOLDERS against any and all claims made by
lenders under such guarantee which arise as a result of URSI's failure to cause
such guarantee to be released on or prior to the Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify
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under Section 401(a) of the Code and makes contributions to such plan at or
above the level stated in Schedule 10.9, or (ii) in the case of each other Plan,
URSI establishes a replacement Plan providing equivalent or better benefits,
provided that if the cost of providing equivalent benefits should, in the good
faith judgment of URSI, become commercially unreasonable, the replacement plan
established by URSI may have benefits that are, in the good faith judgment of
URSI, as close to equivalent as can be obtained at commercially reasonable cost.
There are no intended third party beneficiaries of this Section 10.9, and after
the Closing Date it can be waived or modified by URSI and STOCKHOLDERS (or their
successors) shown as owning two-thirds of COMPANY Stock on Annex II.
10.10 Option. For the period beginning twelve (12) months after and ending
three (3) years after the Closing Date, URSI will have an option (the "URSI
Option") to purchase from STOCKHOLDER (i) all of the issued and outstanding
shares of capital stock of Rheuban Motors, Inc. ("Rheuban") then held by him and
(ii) all rights of STOCKHOLDER under that certain option (the "STOCKHOLDER
Option") to purchase all issued and outstanding capital stock of Rheuban not
held by STOCKHOLDER, for an amount equal to the greater of (i) $1,000,000 or
(ii) the product of thirteen (13) times the aggregate pro forma after-tax net
income (determined as if Rheuban were a tax-paying "C" corporation for federal
and state income tax purposes) of Rheuban for the then most recent 12-month
period, determined in accordance with generally accepted accounting principles
as certified by URSI's independent public accounting firm, minus the amount, if
any, required to exercise any unexercised portion of the STOCKHOLDER Option (the
"URSI Option Exercise Price"). STOCKHOLDER represents and warrants that he has
provided URSI with a true and correct copy of the STOCKHOLDER Option and that:
(a) Within 45 days of Rheuban's being awarded the towing and
recovery contract for the Los Angeles Police Division 8 (West Los Angeles), and
its boundaries, for Official Police Garage work, he will exercise the
STOCKHOLDER Option.
(b) Prior to the termination of the URSI Option, he will not
sell or transfer any of his shares of capital stock of Rheuban or any interest
in the STOCKHOLDER Option to any party other than URSI and he will cause Rheuban
not to issue any shares of its capital stock prior to the termination of the
URSI Option to any person other than himself or URSI.
(c) He will not cancel, amend or otherwise modify the
STOCKHOLDER Option without the consent of URSI.
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(d) Within thirty (30) days after of URSI's request, he will
cause Rheuban to provide URSI with financial statements showing the results of
operations for, and financial condition as of the end of, the most recent three
month and/or 12 month periods ending prior to such request. URSI shall have the
right, at its expense, to cause its independent accountants to conduct an audit
of Rheuban's financial statements for any 12 month period ending prior to the
termination of the URSI Option.
(e) All certificates for shares of stock of Rheuban capital
stock that are owned by STOCKHOLDER will bear the following legend: "THE SHARES
OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION IN FAVOR OF
UNITED ROAD SERVICES, INC., 8 AUTOMATION LANE, ALBANY, NY 12205."
If URSI exercises the URSI Option, then STOCKHOLDER and URSI shall
enter into a purchase agreement containing, to the extent relevant,
substantially the same representations and warranties and indemnification
provisions as are provided by the parties in this Agreement and shall cooperate
to consummate such transaction within 30 days of URSI's exercise of the URSI
Option.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except with respect to
Sections 5.30 through 5.32, which shall be several), will indemnify, defend,
protect and hold harmless URSI, the COMPANY and the Surviving Corporation at all
times from and after the date of this Agreement until the Expiration Date as
defined in Section 5 above, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by URSI, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith (other than the
representations and warranties provided in Section 5.22, for which Section 11.6
provides special indemnity provisions); (ii) any nonfulfillment of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or
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otherwise, (x) arising out of or based upon any untrue statement of a material
fact relating to the COMPANY (including the COMPANY's Subsidiaries) or the
STOCKHOLDERS that is provided to URSI or its counsel by the COMPANY or the
STOCKHOLDERS and contained in any preliminary prospectus relating to the IPO,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or (y) arising out of or based upon any
omission to state therein a material fact relating to the COMPANY (including the
COMPANY's Subsidiaries) or the STOCKHOLDERS that is required to be stated
therein or necessary to make the statements therein not misleading, and not
provided to URSI or its counsel by the COMPANY or the STOCKHOLDERS, provided,
however, that such indemnity shall not inure to the benefit of URSI, the COMPANY
or the Surviving Corporation to the extent that such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in
writing, corrected information to URSI counsel and to URSI for inclusion in the
final prospectus, and such information was not so included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for the liabilities and obligations of the COMPANY as provided in
Section 1 hereof (except to the extent that URSI has claims against the
STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim
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by a person not a party to this Agreement ("Third Person"), or the commencement
of any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if such
counsel shall have a conflict of interest that prevents such counsel from
representing Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing and Indemnifying
Party will reimburse the Indemnified Party for the expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim and all additional costs
of settlement or judgment. If the Indemnifying Party does not undertake to
defend such matter as to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying
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Party, and the Indemnified Party may settle such matter, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. All settlements hereunder shall effect a complete release
of the Indemnified Party, unless the Indemnified Party otherwise agrees in
writing. The parties hereto will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Section, provided that no Indemnifying
Party shall be obligated to seek any payment pursuant to the terms of any
insurance policy. All indemnification payments under this Section shall be
deemed adjustments to the Merger consideration provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two percent (2%) of the aggregate value of the
consideration paid to the STOCKHOLDERS on the Closing Date pursuant to Section
2.2 of this Agreement unless this Agreement is terminated prior to the Closing
Date, in which event the Indemnification Threshold is an amount equal to two
percent (2%) of the Minimum Value set forth in Annex I. All such amounts
otherwise payable by one or more STOCKHOLDERS in excess of the amount so offset
and reduced shall be paid without offset or reduction pursuant to this Section
11.5(i). This Section 11.5(i) shall not apply to amounts payable pursuant to
Section 11.6. For purposes of determining the Indemnification Threshold, the
URSI Stock shall be valued at the initial price of the URSI Stock sold to the
public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
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Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no event shall any STOCKHOLDER be
liable under this Agreement, including this Section 11, to pay more than
one-half the amount of the proceeds received by such STOCKHOLDER pursuant to
this Agreement, calculated as provided in Section 11.5(iv), with respect to
Specially Limited Claims. Specially Limited Claims are all claims that may be
made pursuant to this Agreement, including this Section 11, except claims based
on (a) breach of representations and warranties in Section 5.13, (b) breach of
representations and warranties in Section 5.19 or Section 5.20 or (c) Section
11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the amount of proceeds received by such
STOCKHOLDER pursuant to this Agreement. The amount of proceeds received by each
STOCKHOLDER shall be calculated (for purposes of Section 11.5(iii) and this
Section 11.5(iv)) by adding (a) the cash proceeds paid to such STOCKHOLDER
pursuant to Section 2.2 hereof prior to the date that the indemnity obligation
of such STOCKHOLDER is paid, plus (b) the net proceeds to such STOCKHOLDER from
the sale of such STOCKHOLDER's URSI Stock received pursuant to Section 2.2
hereof prior to the date that the indemnity obligation of such STOCKHOLDER is
paid, plus (c) the Fair Market Value (as defined in Annex I) of the unsold
shares of URSI Stock received by such STOCKHOLDER pursuant to Section 2.2 prior
to the date that the indemnity obligation of such STOCKHOLDER is paid, valued on
the trading day prior to the day the indemnification obligation is paid.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid
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from the proceeds of the sale of such shares of URSI Stock shall not be payable
until ten (10) days after such shares may be sold pursuant to such registration
statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises either (a) by reason of KPMG Peat Marwick LLP's
interpretation of generally accepted accounting principles as reflected in the
Financial Statements, or (b) by reason of KPMG Peat Marwick, having first been
provided by COMPANY or such STOCKHOLDER with all necessary and relevant
information relating to an item to be set forth on the Financial Statements, not
including or properly presenting such item on the Financial Statements in
accordance with generally accepted accounting principles consistently applied,
provided, however, that the limitation on liability set forth in subsection (b)
above shall not limit the liability of any STOCKHOLDER to URSI with respect to
any item if such STOCKHOLDER prior to the Closing Date has actual knowledge
(including, if applicable, an actual knowledge of the generally accepted
accounting principles relevant to an item) of a failure by KPMG Peat Marwick LLP
to so include or properly present an item and did not prior to the Closing Date
inform URSI of any such item as to which such STOCKHOLDER has such actual
knowledge. The provisions and limitations of this section shall have no
relevance to, and shall not be applied against or otherwise serve to reduce, any
basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and all Taxes
(including without limitation any obligation to contribute to the payment of, or
be entitled to share in the refund of, a Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that includes
or included the COMPANY or any Acquired Party) which are (i) imposed on any
member (other than the COMPANY or any Acquired Party) of the consolidated,
unitary or combined group which includes or included the COMPANY or any Acquired
Party or (ii) imposed on the COMPANY or any Acquired Party in respect of its
income, business, property or operations or for which the COMPANY or any
Acquired Party may otherwise be liable (A) for any Pre-Closing Period, (B)
resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date,
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(C) resulting from the COMPANY or any Acquired Party ceasing to be a member of
any affiliated group (within the meaning of Section 1504(a) of the Code), (D) in
respect of any Post-Closing Period, attributable to events, transactions, sales,
deposits, services or rentals occurring, received or performed in a Pre-Closing
Period, (E) in respect of any Post-Closing Period, attributable to any change in
accounting method employed by the COMPANY or any Acquired Party during any of
the four previous taxable years, (F) in respect of any Post-Closing Period,
attributable to any items of income or gain of an entity treated as a
partnership reported by the COMPANY or any Acquired Party as a partner, to the
extent such items are properly attributable to periods of the "partnership"
ending on or before the Closing Date, or (G) attributable to any discharge of
indebtedness that may result from any capital contributions by STOCKHOLDERS (or
an affiliate of STOCKHOLDERS) to the COMPANY or any Acquired Party of any
intercompany indebtedness owed by COMPANY to any STOCKHOLDER (or an affiliate of
any STOCKHOLDER), but, in each case, only to the extent such Taxes or the
entitlement to such refund are not reflected on the applicable Company Financial
Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv), Section 5.22(xxv) or Section 5.22(xxvi) and (y)
any liability imposed on URSI, the COMPANY and any Acquired Party (or any
affiliate of such companies) attributable to any breach of a warranty or
representation made by STOCKHOLDERS in Section 5.22, excluding Section 5.22(xx),
Section 5.22(xxiv), Section 5.22(xxv) and Section 5.22(xxvi).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS from (x) any
Taxes imposed on URSI, the COMPANY or any Acquired Party with respect to any
Post-Closing Period and (y) any liability imposed on STOCKHOLDERS attributable
to any breach of a warranty or representation made by URSI in Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together
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with interest thereon at the prime rate in effect from time to time as
determined by Bank of America N.T. & S.A., compounded quarterly from the date
incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall
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keep the STOCKHOLDERS duly informed of any proceedings in connection with an
Interim Period and (ii) the STOCKHOLDERS shall be entitled to receive copies of
all correspondence and documents relating to such proceedings and may, at their
option, observe such proceedings (including any associated meetings or
conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
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(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre-Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's
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proposed transaction with the COMPANY and the Other Companies as contemplated by
this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
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Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations under this
Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of
this Section 13 if URSI and/or any subsidiary thereof shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any
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STOCKHOLDER against URSI (including the subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by URSI of such covenants. It is specifically agreed that the period
of five (5) years stated at the beginning of this Section 13, during which the
agreements and covenants of each STOCKHOLDER made in this Section 13 shall be
effective, shall be computed by excluding from such computation any time during
which such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in this Section 13 shall not be affected by any breach of
any other provision hereof by any party hereto, except that upon URSI's
admission in writing, or a final judicial determination which is not the subject
of appeal or further appeal by URSI, that URSI has materially breached a
STOCKHOLDER's Employment Agreement (if applicable), right to have URSI Stock
registered under the 1933 Act pursuant to Section 17.1 or 17.2, or right to
receive contingent consideration as provided in section C of Annex I, and URSI's
failure to cure such material breach within 30 days of such admission or final
judicial determination, whichever is applicable, then the covenants contained in
this Section 13 with respect to such STOCKHOLDER will expire. The covenants
contained in this Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under color of law, provided that prior
to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS
shall, if possible, give prior written notice thereof to URSI and provide URSI
with the opportunity to contest such disclosure, or (iii) the disclosing party
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reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this section,
URSI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting URSI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. Upon termination of this Agreement prior to the Closing Date
for any reason other than the material breach or default of any STOCKHOLDER or
COMPANY, URSI will return to COMPANY all documents containing confidential
information of COMPANY that were provided to URSI by COMPANY or STOCKHOLDERS and
all summaries, abstractions, projections, pro formas or like material prepared
by URSI incorporating such confidential information. In the event of a breach or
threatened breach by URSI of the provisions of this section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining URSI from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree
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that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as URSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel)
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by the terms and conditions of this Agreement with respect to any further
transfer of such shares: (a) any family member of a STOCKHOLDER (including,
without limitation, any transfer to a custodian under any gift to minors
statute), with family members being defined as any spouse, lineal descendant or
ancestor of a STOCKHOLDER), (b) any trust which is for the benefit of one or
more family members of a STOCKHOLDER and (c) any corporation, partnership,
limited liability company or other entity (x) of which a majority of the
interests therein by value is owned by the STOCKHOLDER and members of the
STOCKHOLDER's family, and (y) which is and continues to be controlled by the
STOCKHOLDER and members of the STOCKHOLDER'S family for the period set forth in
Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits
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and risks of the proposed investment in the URSI Stock. The STOCKHOLDERS or
their respective purchaser representatives have had an adequate opportunity to
ask questions and receive answers from the officers of URSI concerning any and
all matters relating to the transactions described herein including, without
limitation, the background and experience of the current and proposed officers
and directors of URSI, the plans for the operations of the business of URSI, the
business, operations and financial condition of the Founding Companies other
than the COMPANY, and any plans for additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests, provided that URSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to URSI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a reorganization described in Section 368(a)(1)(A)
of the Code. In addition, if URSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than URSI is greater than the number of
such shares which can be offered without adversely affecting the offering, URSI
may reduce the number of shares offered for the accounts of such persons to a
number deemed satisfactory by such managing underwriter, provided that such
reduction shall be made first by reducing the number of shares to be sold by
persons other than URSI, the stockholders named on Annex III hereto, the
stockholders of the Founding Companies, and any person or persons who have
required such registration pursuant to "demand" registration rights granted by
URSI; thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of
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URSI Stock owned by such stockholder immediately after the Closing, provided
that if any stockholder does not wish to sell all shares such stockholder is
permitted to sell, the opportunity to sell additional shares shall be
reallocated in the same manner to those stockholders named in Annex III hereto
and stockholders of the Founding Companies who wish to sell more shares until no
more shares can be sold by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
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In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER may request in writing
that URSI file a registration statement under the 1933 Act requesting such
number of such STOCKHOLDER's shares of URSI Stock as is required to be sold to
pay the difference between the cash proceeds and the amount of the
indemnification obligation, plus legal and other expenses, including expenses of
the offering, provided arrangements are made to URSI's reasonable satisfaction
that the proceeds will be used solely for the purpose of such indemnification
and the payment of related expenses and that arrangements are made to the
reasonable satisfaction of URSI that the proceeds of such sale will be used
solely for the purpose of such indemnification and the payment of related
expenses, and that no such request may be made until after one hundred eighty
(180) days following the Closing Date without the consent of the managing
underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by
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such requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the
Pre-Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the
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STOCKHOLDERS, the COMPANY and URSI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms. Except as otherwise stated herein,
this Agreement and the Annexes hereto may be modified or amended only by a
written instrument executed by the STOCKHOLDERS, the COMPANY and URSI, acting
through their respective officers, duly authorized by their respective Boards of
Directors. Any disclosure made on any Schedule delivered pursuant hereto shall
be deemed to have been disclosed for purposes of any other Schedule required
hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the
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STOCKHOLDERS and incurred prior to the Pricing Date may be paid from COMPANY
funds rather than from personal funds of the STOCKHOLDERS, provided that the
STOCKHOLDERS provide to URSI, prior to the Pricing Date, a detailed statement
setting forth the type and amount of all such fees, expenses or disbursements so
paid, and, provided further, that the aggregate amount of same shall be
deducted, on a dollar-for-dollar basis, from the amount of cash into which the
COMPANY Stock shall be converted pursuant to Section 2.2 hereof. Notwithstanding
the foregoing provisions of Section 18.6, URSI shall further pay or reimburse
reasonable costs of counsel or co-counsel for the Company if and to the extent
so mutually agreed in advance between URSI and such counsel, in circumstances
where URSI believes it obtained or may have obtained a material benefit, in
light of market conditions and other factors, by reason of such counsel or
co-counsel expediting the transaction which is the subject of this Agreement and
reducing the time required to complete this Agreement and the Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
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(c) If mailed to the COMPANY, addressed to it at:
Keystone Towing, Inc.
7817 Woodley Avenue
Van Nuys, CA 91406
Attn: Mark J. Henninger
and marked "Personal and Confidential" with copies to:
Michael Wofford, Esq.
Clark & Trevithick
800 Wilshire Blvd.
12th Floor
Los Angeles, CA 90017
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the
California state court of general jurisdiction in Los Angeles County, California
(or, if there is federal jurisdiction, then the exclusive jurisdiction and venue
of the United States District Court having jurisdiction over Los Angeles
County). The parties hereby consent to the personal and exclusive jurisdiction
and venue of said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
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18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
__________________________________ By _______________________________
Name:
Title:
WITNESS: STOCKHOLDERS:
__________________________________ __________________________________
MARK J. HENNINGER
WITNESS: KEYSTONE TOWING, INC.
_________________________________ By _______________________________
Name:
Title:
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ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
KEYSTONE TOWING, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $4,531,488 in cash.
2. 377,624 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $9,062,976.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate
the Merger if the aggregate value of cash and URSI Stock (valued at the IPO
initial public offering price) is less than the Minimum Value of $8,496,540.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
Mark J. Henninger 377,624 $4,531,488
------- ----------
TOTALS: 377,624 $4,531,488
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 1 Excess Revenues are greater than zero, then:
<PAGE>
a. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 1 Payout Date.
b. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
c. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
d. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
e. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 2 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date.
b. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
c. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
d. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 3 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date.
<PAGE>
b. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
c. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
4. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 4 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date.
b. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 5 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 5 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the revenues reported by
URSI for a fiscal year that are generated by operations acquired by URSI by
means of the Merger, provided that revenues reported by URSI for fiscal year
1998 will be adjusted to reflect revenues of COMPANY from January 1, 1998 until
the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year
1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year
1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year
2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year
2001.
<PAGE>
f. "Year 5 Actual Revenues" means Revenues for fiscal year
2002.
g. "Year 1 Target Revenues" means $4,337,380.
h. "Year 2 Target Revenues" means the greater of (i) 110% of
Year 1 Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of
Year 2 Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of
Year 3 Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of
Year 4 Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year
1 Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are
equal to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are
zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year
2 Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are
equal to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are
zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year
3 Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are
equal to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are
zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year
4 Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are
equal to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are
zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year
5 Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are
equal to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are
zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
<PAGE>
r. "Year 2 Payout Date" means thirty days (30) after URSI
announces its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2000.
t. "Year 4 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues,
including without limitation decisions regarding the allocation and
non-allocation of capital and other resources, decisions regarding business that
will be accepted or rejected, personnel decisions including decisions to lay off
employees, and decisions to shut down or downsize operations, all without making
any offsetting adjustments to Revenues or contingent consideration, provided
only that such decisions are made in a good faith effort to maximize total
return to the shareholders of URSI to the extent that the same can be realized
without undue risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired by
URSI by means of the Merger are sold, a reasonable adjustment will be made to
these provisions so that the contingent consideration paid to STOCKHOLDERS will
be approximately the same as it would have been if the fiscal year had not been
changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock
to be paid as contingent consideration, URSI Stock will be valued at Fair Market
Value as of the trading day the day before the contingent consideration is paid.
"Fair Market Value" of the URSI Stock as of a date means the market price per
share of such Shares determined by the Board of Directors of URSI as follows:
(a) if the URSI Stock is traded on a stock exchange on the date in question,
then the Fair Market Value will be equal to the closing price reported by the
applicable composite-transactions report for such date; (b) if the URSI Stock is
traded over-the-counter on the date in question and is classified as a national
market issue, then the Fair Market Value will be equal to the last-transaction
price quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean
<PAGE>
between the last reported representative bid and asked prices quoted by the
NASDAQ system for such date; and (d) if none of the foregoing provisions is
applicable, then the Fair Market Value will be determined by the Board of
Directors of URSI in good faith on such basis as it deems appropriate.
11. Despite anything to the contrary in this Annex I or elsewhere in
the Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS
as contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or
the number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
13. The right to be paid contingent consideration is personal and
cannot be assigned by any STOCKHOLDER without the consent of URSI except upon
the death of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon
any STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
Mark J. Henninger 100%
---
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of each
Other Company:
Percentage of
Total Percentage of Fixed
Shares of Fixed Consideration
Common Consideration to be paid in
Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transport, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Auto Delivery,
Inc. 356,850 50% 50%
Northland Auto
Transporters, Inc. 588,435 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,375,741
<PAGE>
EXHIBIT 2.9
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
ASC TRANSPORTATION SERVICES
ROBERT B. BOXWELL, JANE D. BOXWELL
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of
Directors of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital
Stock of the COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 4
2.1 Manner of Conversion 4
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES OF URSI STOCK 4
4. PRE-CLOSING AND CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY
and STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 9
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 11
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and
Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
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<PAGE>
Page
----
5.18 Compensation; Employment Agreements 15
5.19 Employee Plans 15
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 20
5.23 No Violations 23
5.24 Government Contracts 24
5.25 Absence of Changes 24
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 26
5.28 Relations with Governments 26
5.29 Disclosure 26
(B) Representations and Warranties of
STOCKHOLDERS 26
5.30 Authority; Ownership 27
5.31 Preemptive Rights 27
5.32 No Intention to Dispose of URSI Stock 27
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 27
6.2 URSI Stock 28
6.3 Validity of Obligations 28
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI
STOCK 29
6.7 No Side Agreements 29
6.8 Subsidiaries 30
6.9 Business; Real Property; Material Agreements;
Financial Information 30
6.10 Conformity with Law 30
6.11 No Violations 31
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 33
7.3 Prohibited Activities 34
7.4 No Shop 35
7.5 Notice to Bargaining Agents 36
7.6 Termination of Plans 36
7.7 URSI Prohibited Activities 36
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<PAGE>
Page
----
7.8 Notification of Certain Matters 36
7.9 Amendment of Schedules 37
7.10 Cooperation in Preparation of Registration Statement 38
7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY 39
8.1 Representations and Warranties; Performance of
Obligations 39
8.2 Satisfaction 39
8.3 No Litigation 40
8.4 Stockholders' Release 40
8.5 Opinion of Counsel 40
8.6 Director Indemnification 40
8.7 Registration Statement 40
8.8 Consents and Approvals 41
8.9 Good Standing Certificates 41
8.10 No Waivers 41
8.11 No Material Adverse Change 41
8.12 Transfer Restrictions 41
8.13 Employment Agreements, Consulting Agreements, Leases
and Cosale Agreement 41
8.14 Tax Opinion 41
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 42
9.1 Representations and Warranties; Performance of
Obligations 42
9.2 No Litigation 42
9.3 Examination of Final Financial Statements 42
9.4 No Material Adverse Effect 43
9.5 STOCKHOLDERS' Release 43
9.6 Satisfaction 43
9.7 Termination of Related Party Agreements 43
9.8 Opinion of Counsel 43
9.9 Consents and Approvals 43
9.10 Good Standing Certificates 44
9.11 Registration Statement 44
9.12 Employment Agreements, Consulting Agreements
and Leases 44
9.13 Repayment of Indebtedness 44
9.14 FIRPTA Certificate 44
9.15 Insurance 44
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<PAGE>
Page
----
9.16 Lien Release 44
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS 45
10.1 Preservation of Tax and Accounting Treatment 45
10.2 Disclosure 45
10.3 Cooperation in Tax Return Preparation 46
10.4 Tax Return Preparation and Filing 46
10.5 Reorganization Status Information Reporting 47
10.6 Special Definitions Relating to Tax Matters 47
10.7 Directors 48
10.8 Release from Guarantees 48
10.9 Preservation of Plans 48
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS
and the Boxwells 49
11.2 Indemnification by URSI 50
11.3 Third Person Claims 50
11.4 Exclusive Remedy 52
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 53
11.7 Special Contest Rights Related to Tax Matters 56
11.8 Special Notification Requirements Regarding Tax
Dispute 57
11.9 Refunds 57
11.10 Optional Payment with Shares 57
12. TERMINATION OF AGREEMENT 57
12.1 Termination 57
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements 58
13. NONCOMPETITION 59
13.1 Prohibited Activities 59
13.2 Damages 60
13.3 Reasonable Restraint 60
13.4 Severability; Reformation 60
13.5 Independent Covenant 60
13.6 Materiality 61
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<PAGE>
Page
----
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 61
14.1 STOCKHOLDERS 61
14.2 URSI 62
14.3 Damages 63
14.4 Survival 63
15. TRANSFER RESTRICTIONS 63
15.1 Transfer Restrictions 63
15.2 Permitted Transferees 64
16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 64
16.2 Accredited Investors; Economic Risk;
Sophistication 64
17. REGISTRATION RIGHTS 65
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 66
17.3 Registration Procedures 67
17.4 Underwriting Agreement 68
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 68
18. GENERAL 68
18.1 Cooperation 68
18.2 Successors and Assigns 69
18.3 Entire Agreement 69
18.4 Counterparts 69
18.5 Brokers and Agents 69
18.6 Expenses 69
18.7 Notices 70
18.8 Governing Law; Forum 71
18.9 Survival of Representations and Warranties 72
18.10 Exercise of Rights and Remedies 72
18.11 Time 72
18.12 Reformation and Severability 72
18.13 Remedies Cumulative 72
18.14 Captions 72
-v-
<PAGE>
SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
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<PAGE>
Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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<PAGE>
TABLE OF DEFINITIONS
Defined Term Section
- ------------ -------
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
Material Documents 5.23
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<PAGE>
Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), ASC TRANSPORTATION SERVICES, a California
corporation (the "COMPANY"), and the stockholders listed on Annex II (the
"STOCKHOLDERS") and Robert B. Boxwell and Jane D. Boxwell (collectively, the
"Boxwells"). The STOCKHOLDERS are all the stockholders of the COMPANY. The
Boxwells are the trustees and the sole beneficiaries of the STOCKHOLDER and
accordingly are also parties hereto in their individual capacities.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., Caron Auto Brokers, Inc., Caron Auto Works, Inc., Falcon
Towing and Auto Delivery, Inc., Keystone Towing, Inc., Northland Auto
Transporters, Inc., Northland Fleet Leasing Company, Silver State Tow &
Recovery, Inc. and Smith-Christensen Enterprises, Inc. (the "Other Companies")
in order to acquire additional vehicle towing and transport companies (the Other
Companies, together with the COMPANY, are collectively referred to herein as the
"Founding Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
-1-
<PAGE>
State of the State of Delaware and, if required, the Articles of Merger or a
similar document to be signed, verified and filed with the relevant authorities
in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
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<PAGE>
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 10,000 shares of no par value common stock, ("COMPANY
Stock"), of which 25 shares are issued and outstanding; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
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<PAGE>
2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of URSI Stock and the
amount of cash calculated pursuant to Section 2.2 above; and
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<PAGE>
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as set forth in Section 2.2,
notwithstanding the number of shares of COMPANY Stock such certificates
represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of URSI
Stock, and the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger, shall occur and be deemed to be completed. If so
requested by any STOCKHOLDER at or prior to the Pre-
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Closing, URSI will use its best efforts to cause all cash to be paid to such
STOCKHOLDER on the CLOSING DATE to be paid by the Underwriters (as defined in
Section 5.29) by initiating a wire transfer payment pursuant to instructions
included in STOCKHOLDER's request. After the Pre-Closing and until the Closing
Date, no party may withdraw, terminate or rescind any delivery made at the
Pre-Closing unless this Agreement is terminated as provided in Section 12. All
documents delivered at the Pre-Closing shall be held by Howard Rice for final
delivery on the Closing Date as directed by the parties and their counsel at the
Pre-Closing, provided only that the Articles of Merger and any similar document
may be filed to become effective on the Closing Date. Should the Agreement be
terminated as provided in Section 12 prior to the Closing Date, the parties
shall take all steps necessary to rescind any such filings, Howard Rice shall
return all documents delivered at the Pre- Closing to the parties who delivered
the same, all such deliveries at the Pre- Closing will be rescinded and a
nullity, the Merger shall not become effective, the shares of COMPANY Stock will
not be converted into URSI Stock, and shares of URSI Stock will not be delivered
to STOCKHOLDERS. The documents delivered at Pre-Closing shall include documents
required to rescind, prior to the Closing Date, any filing of the Articles of
Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"),
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the Securities Exchange Act of 1934, as amended (the "1934 Act"), and all other
applicable Federal or state securities laws, which date shall be deemed to be
the Expiration Date for purposes of Section 11.1(iii) hereof.
5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and the COMPANY's Subsidiaries, taken as a whole (a "Material
Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in which the
COMPANY is authorized or qualified to do business. True, complete and correct
copies of the Certificate of Incorporation and Bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the "Charter
Documents"), certified by the Secretary or Assistant Secretary of the COMPANY,
are all attached hereto as Schedule 5.1. A true, complete and correct copy of
each Certificate of Incorporation included in the Charter Documents, certified
by the Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind. All
of the issued and outstanding shares of the capital stock of the COMPANY have
been duly authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the STOCKHOLDERS and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal
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laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
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COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY ("Affiliates") other
than in the ordinary course of business, within the preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's Balance Sheet as of December 31, 1997, and Statements of
Operations, Cash Flows and Retained Earnings for the one year period ended
December 31, 1997 (December 31, 1997 being hereinafter referred to as the
"Balance Sheet Date"). Such Financial Statements have been prepared in
accordance with KPMG Peat Marwick LLP's interpretation of generally accepted
accounting principles applied on a consistent basis throughout the period
indicated (except as noted). Except as set forth on Schedule 5.9, such Balance
Sheet as of December 31, 1997 presents fairly the financial position of the
COMPANY (and each of the COMPANY's Subsidiaries on a consolidated basis) as of
the date indicated thereon, and such Statements of Operations, Cash Flows and
Retained Earnings present fairly the results of their respective operations for
the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
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would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such balance
sheet were being prepared immediately prior to Closing or if such liabilities
represent liabilities of the nature described in Section 5.13, Section 5.20
and/or Section 5.22 (excluding items subject to any knowledge qualifications
contained in any of these sections); and
(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent
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reflected on Schedule 5.11, such accounts and notes are collectible in the
amount shown on Schedule 5.11, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle titles and
current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a Material Adverse Effect. The COMPANY has
delivered to URSI an accurate list and summary description (Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
provided that copyrights need not be listed unless registered. To the knowledge
of the COMPANY, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12 are valid, and neither the COMPANY nor
any of the COMPANY's Subsidiaries has received any notice that any governmental
authority intends to cancel, terminate or not renew any such license, franchise,
permit or other governmental authorization. The COMPANY (including the COMPANY's
Subsidiaries) has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a Material
Adverse Effect upon the rights and benefits afforded to the COMPANY (including
the COMPANY's Subsidiaries) by, any such licenses, franchises, permits or
government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport,
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store, dispose of or otherwise handle Solid Wastes, Hazardous Wastes or
Hazardous Substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the COMPANY
or any of the COMPANY's Subsidiaries where Solid Wastes, Hazardous Wastes or
Hazardous Substances have been treated, stored, used, disposed of or otherwise
handled; (iii) there have been no releases (as defined in Environmental Laws)
at, from, under, in or on any property owned or operated by the COMPANY or any
of the COMPANY's Subsidiaries except as permitted by Environmental Laws; (iv) to
the knowledge of the COMPANY there is no on-site or off-site location to which
the COMPANY or any of the COMPANY's Subsidiaries has transported or disposed of
Solid Wastes, Hazardous Wastes or Hazardous Substances or arranged for the
transportation of Solid Wastes, Hazardous Wastes or Hazardous Substances, which
site is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
any of the COMPANY's Subsidiaries or URSI for any clean-up cost, remedial work,
damage to natural resources or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) to the knowledge of the COMPANY the
COMPANY has no contingent liability in connection with any release of any Solid
Waste, Hazardous Waste or Hazardous Substance into the environment. Schedule
5.13 lists all releases of Hazardous Wastes or Hazardous Substances by the
COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500, including in the case of
(z) true, complete and correct copies of all such leases and including in cases
(x), (y) and (z) an indication as to which real and personal property is
currently owned, or was formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as shown on Schedule 5.14, all
of the trucks and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedule 5.14 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.14 are in full force and effect and constitute valid and binding agreements on
the COMPANY (or a COMPANY Subsidiary, as applicable), and to the knowledge of
the COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their respective
terms. All fixed assets used by the
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COMPANY and the COMPANY's Subsidiaries that are material to the operation of
their respective businesses are either owned by the COMPANY or the COMPANY's
Subsidiaries or leased under an agreement indicated on Schedule 5.14. Schedule
5.14 shall, without limitation, contain true, complete and correct copies of all
title reports and title insurance policies received or owned by the COMPANY or
the COMPANY's Subsidiaries. The COMPANY has also provided in Schedule 5.14 a
summary description of all plans or projects which have been memorialized in any
written or electronic document or file and involves the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business, with respect to which the COMPANY (or any of the
COMPANY's Subsidiaries) has made any expenditure in the two-year period prior to
the date of the Agreement in excess of $10,000, or which if pursued by the
COMPANY (or such Subsidiary) would require additional expenditures of capital in
excess of $10,000. Except as set forth on Schedule 5.14 and except for liens
excepted in Section 7.3(vi)(1) and (3), there are no liens against the COMPANY's
properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
leases, liens, pledges or other security agreements) (a) as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to URSI, except
that leases set forth on Schedule 5.14 need not be set forth on Schedule 5.15.
Except to the extent set forth on Schedule 5.15, (i) none of the COMPANY's
(including the COMPANY's Subsidiaries) significant customers has cancelled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel any Material Contract or substantially
reduce utilization of the services provided by the COMPANY (including the
COMPANY's Subsidiaries), and (ii) the COMPANY and the COMPANY's Subsidiaries
have complied with all material commitments and obligations pertaining to any
Material Contract, and are not in default under any such Material Contract, and
no notice of default has been received, and no Stockholder or any affiliate
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of any Stockholder is a party to any such Material Contract. Except as set forth
in Schedule 5.15, the COMPANY and the COMPANY's Subsidiaries have not been the
subject of any election in respect of union representation of employees and are
not bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.15, no employees of the COMPANY or its Subsidiaries are
represented by any labor union or covered by any collective bargaining agreement
and no campaign to establish such representation has ever occurred or is in
progress. There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries) and any
group of its employees, nor has the COMPANY (including the COMPANY's
Subsidiaries) experienced any labor interruptions over the past three years, and
the COMPANY considers its relationship with employees to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
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5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a classification of employees covered
thereby (collectively, the "Plans"). Schedule 5.19 sets forth all of the Plans
that have been terminated within the past six years. The COMPANY has heretofore
delivered to URSI correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
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(ix) The bond required by Section 412 of ERISA, if any.
(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the
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Closing Date will have) any obligation whatsoever to contribute to any
"multi-employer pension plan" (as defined in ERISA Section 4001(a)(14)), nor has
any withdrawal liability whatsoever (whether or not yet assessed) arising under
or capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, except as set forth in Schedule 5.20:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
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(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
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(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect
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timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the
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meaning of Section 168 of the Code. No Acquired Party is a party to any "safe
harbor lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to
any "long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-
Closing Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of
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the transaction. Moreover, shares of COMPANY Stock and shares of URSI Stock held
by STOCKHOLDERS and otherwise sold, redeemed, or disposed of on or after January
1, 1997, including after the Closing Date, will be considered in making this
representation.
(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any STOCKHOLDER-
employees of the COMPANY will be separate consideration for, or allocable to,
any of their shares of the COMPANY; none of the shares of URSI Stock received by
any STOCKHOLDER-employees in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
STOCKHOLDER-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not
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exceed 7.5% of the aggregate consideration to be received by such STOCKHOLDERS
pursuant to the Merger.
(xxvi) Intentionally Omitted.
(xxvii) Intentionally Omitted.
Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
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(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
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5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person
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affiliated or associated with the COMPANY for any failure of the Registration
Statement to become effective, or of the IPO to occur at a particular price or
within a particular range of prices or to occur at all; and (iii) the decision
of STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent
to the proposed Merger, has been made independent of, and without reliance upon,
any statements, opinions or other communications of, or due diligence
investigations which have been or will be made or performed by any prospective
Underwriter, relative to URSI or the prospective IPO. The Underwriters shall
have no obligation to the STOCKHOLDERS with respect to any disclosure contained
in the Registration Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
be true at the time of Pre-Closing and the Closing Date and that such
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representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
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6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly
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issued, fully paid and nonassessable. All of the shares of URSI Stock issued to
persons set forth on Annex III and, based on the representations of STOCKHOLDERS
contained in this Agreement and in the documents delivered to URSI pursuant
hereto, to STOCKHOLDERS pursuant to this Agreement, were or will be offered,
issued, sold and delivered by URSI in compliance with all applicable state and
federal laws concerning the issuance of securities and none of such shares were
or will be issued in violation of the preemptive rights of any past or present
stockholder. On the Closing Date the capitalization of URSI will be as set forth
in the Registration Statement.
6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or
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contingent, other than those incurred in connection with this Agreement, the
Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. URSI (including URSI's Subsidiaries)
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a URSI Material Adverse Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
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6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-
employees of the COMPANY after the Merger will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
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7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Founding Companies other than the COMPANY as confidential in
accordance with the provisions of Section 14 hereof. In addition, URSI will
cause each of the Founding Companies other than the COMPANY to enter into a
provision similar to this Section 7.1 requiring each such Founding Company to
keep confidential any information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
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(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
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make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of the businesses of the COMPANY
(including the COMPANY's Subsidiaries), or (2) liens set forth on Schedule 5.15
hereto or (3) liens for taxes either not yet due or materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely
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affect the Tax liability of the Company or any Acquired Party (or URSI following
the Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the COMPANY or a merger,
consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
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(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder, provided no such notice shall be required
until the Pricing Date with respect to the occurrence in the ordinary course of
business of any event which would cause Schedules 5.10, 5.11 or 5.14 to be
incorrect. URSI shall give prompt notice to the COMPANY of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of URSI contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any material failure of URSI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.9, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre- Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-
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Closing, unless such Schedule is to be amended to reflect an event occurring
other than in the ordinary course of business. In the event that the COMPANY
amends or supplements a Schedule pursuant to this Section 7.9, and URSI and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. In
the event that URSI amends or supplements a Schedule pursuant to this Section
7.9 and COMPANY and a majority of the Founding Companies do not consent to the
effectiveness of such amendment or supplement at or before the Pre-Closing, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 7.9. In the event
that one of the other Founding Companies amends or supplements a Schedule
pursuant to Section 7.9 of one of the Other Agreements, URSI shall give the
COMPANY notice promptly after it has knowledge thereof. If URSI, COMPANY and a
majority of the Founding Companies do not consent to the effectiveness of such
amendment or supplement at or before the Pre-Closing, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 12.1(i) hereof. For
purposes of this Section 7.9, URSI shall be deemed to have given its consent to
the effectiveness of any amendment or supplement to a Schedule if URSI does not
notify COMPANY of its disapproval within 48 hours after URSI is notified of such
amendment or supplement, and COMPANY and each other Founding Company shall be
deemed to have given its consent to the effectiveness of any amendment or
supplement to a Schedule if COMPANY or such other Founding Company, as
applicable, does not notify URSI of its disapproval within 48 hours after
COMPANY or such other Founding Company, as applicable, is notified of such
amendment or supplement. Except as otherwise provided herein, no amendment of or
supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the
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STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
financial statements of the COMPANY for any quarter subsequent to December 31,
1997 are required to be included in the Registration Statement, the COMPANY
shall provide, and URSI shall have had sufficient time to review, the unaudited
balance sheet and statements of income, cash flows and retained earnings of the
COMPANY as of the end of such quarter, disclosing no Material Adverse Change in
the financial condition or results of operations of the COMPANY. Such financial
statements, which shall be deemed to be Financial Statements (as described in
Section 5.9), shall have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted therein). To the extent such Financial Statements
shall be included or reflected in the Registration Statement, any events or
circumstances reflected therein which might constitute a Material Adverse Effect
with respect to the COMPANY shall be deemed to have been waived by URSI and URSI
shall have no rights in respect of such Material Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
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STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced prior to the initial filing
with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
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amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
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pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of URSI as a result of
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which the management of URSI deems it inadvisable to proceed with the
transactions hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY for the fiscal quarters beginning after the Balance Sheet
Date, and the unaudited consolidated statement of income, cash flows and
retained earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no material adverse change in the financial
condition of the COMPANY or the results of its operations from the financial
statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Alan
Schostag, Esq., counsel to the COMPANY and the STOCKHOLDERS, dated the Pricing
Date, in the form annexed hereto as Annex VI, and the Underwriters shall have
received a copy of the same opinion addressed to them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the
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COMPANY shall have obtained and delivered to URSI such additional consents to
the Merger as URSI may reasonably request including, without limitation, URSI's
receipt on or prior to the Pricing Date of those licenses, franchises, permits
or governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the persons listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
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9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
9.16 Lien Release. STOCKHOLDER shall have delivered to URSI a complete
release of the lien described in Schedule 5.3 on the COMPANY Stock and the stock
of the COMPANY's Subsidiaries, in form satisfactory to URSI.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
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the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing agreements and other documents containing the Tax Data
("Tax Documentation"). The Tax Data and the Tax Documentation shall be retained
until one year after the expiration of all applicable statutes of limitations
(including extensions thereof); provided, however, that in the event an audit,
examination, investigation or other proceeding has been instituted prior to the
expiration of an applicable statute of limitations, the Tax Data and Tax
Documentation relating thereto shall be retained until there is a final
determination thereof (and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to
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period and (b) prepare such Tax Returns in a manner consistent with prior years,
in each case as determined in the good faith judgment of the preparer of such
returns; provided, however, that in all events such Tax Returns shall be
prepared in a manner consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the total
number of days in such period, and (ii) in the case of a Tax that is based on
income or gross receipts, the Tax that would be due with respect to the Interim
Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(b) "Interim Period" shall mean any taxable period commencing
prior to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period
that begins before the Closing Date and ends on or before the Closing Date and
(ii) the portion of any Interim Period through and including the Closing Date.
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(d) "Post-Closing Period" means any taxable period that begins
after the Closing Date, and, with respect to any Interim Period, the portion of
such Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income,
gross receipts, ad valorem, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A), customs duties, capital stock, net worth, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, workers compensation, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government,
including any interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations,
claims for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, having or purporting to have jurisdiction with respect to
any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such guarantees on indebtedness
being assumed by URSI. URSI agrees to indemnify the STOCKHOLDERS against any and
all claims made by lenders under such guarantee which arise as a result of
URSI's failure to cause such guarantee to be released on or prior to the
Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify
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under Section 401(a) of the Code and makes contributions to such plan at or
above the level stated in Schedule 10.9, or (ii) in the case of each other Plan,
URSI establishes a replacement Plan providing equivalent or better benefits,
provided that if the cost of providing equivalent benefits should, in the good
faith judgment of URSI, become commercially unreasonable, the replacement plan
established by URSI may have benefits that are, in the good faith judgment of
URSI, as close to equivalent as can be obtained at commercially reasonable cost.
There are no intended third party beneficiaries of this Section 10.9, and after
the Closing Date it can be waived or modified by URSI and STOCKHOLDERS (or their
successors) shown as owning two-thirds of COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS, the BOXWELLS and URSI each make the following
covenants that are applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS and the BOXWELLS. The
STOCKHOLDERS and BOXWELLS covenant and agree that they, jointly and severally
(except with respect to Sections 5.30 through 5.32, which shall be several),
will indemnify, defend, protect and hold harmless URSI, the COMPANY and the
Surviving Corporation at all times from and after the date of this Agreement
until the Expiration Date as defined in Section 5 above, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by URSI, the COMPANY or
the Surviving Corporation as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or the COMPANY set forth
herein or on the schedules or certificates delivered in connection herewith
(other than the representations and warranties provided in Section 5.22, for
which Section 11.6 provides special indemnity provisions); (ii) any
nonfulfillment of any agreement on the part of the STOCKHOLDERS or the COMPANY
under this Agreement; or (iii) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, (x)
arising out of or based upon any untrue statement of a material fact relating to
the COMPANY (including the COMPANY's Subsidiaries) or the STOCKHOLDERS that is
provided to URSI or its counsel by the COMPANY or the STOCKHOLDERS and contained
in any preliminary prospectus relating to the IPO, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or (y) arising out of or based upon any omission to state therein a
material fact relating to the COMPANY (including the COMPANY's Subsidiaries) or
the STOCKHOLDERS that is required to be stated therein or necessary to make the
statements therein not misleading, and not provided to URSI or its counsel
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by the COMPANY or the STOCKHOLDERS, provided, however, that such indemnity shall
not inure to the benefit of URSI, the COMPANY or the Surviving Corporation to
the extent that such untrue statement (or alleged untrue statement) was made in,
or omission (or alleged omission) occurred in, any preliminary prospectus and
the STOCKHOLDERS provided, in writing, corrected information to URSI counsel and
to URSI for inclusion in the final prospectus, and such information was not so
included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY, the STOCKHOLDERS and
the BOXWELLS at all times from and after the date of this Agreement until the
Expiration Date, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by the COMPANY and the STOCKHOLDERS as a result of or
arising from (i) any breach by URSI of its representations and warranties set
forth herein or on the schedules or certificates attached hereto; (ii) any
nonfulfillment of any agreement on the part of URSI under this Agreement; (iii)
any liabilities which the COMPANY or the STOCKHOLDERS may incur due to URSI's
failure to be responsible for the liabilities and obligations of the COMPANY as
provided in Section 1 hereof (except to the extent that URSI has claims against
the STOCKHOLDERS by reason of such liabilities); or (iv) any liability under the
1933 Act, the 1934 Act or other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to URSI or any of the Founding
Companies other than the COMPANY contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to URSI
or any of the Founding Companies other than the COMPANY that is required to be
stated therein or necessary to make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying
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Party pursues the same in good faith and diligently, provided that the
Indemnifying Party shall not settle any criminal proceeding without the consent
of the Indemnified Party. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. All Indemnified Parties shall use the same counsel, which shall be the
counsel selected by Indemnifying Party, provided that if such counsel shall have
a conflict of interest that prevents such counsel from representing Indemnified
Party, Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel. After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses. If the Indemnifying Party
desires to accept a final and complete settlement of any such Third Person claim
and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person and the Indemnified Party shall reimburse the Indemnifying Party
for any additional costs of defense which it subsequently incurs with respect to
such claim and all additional costs of settlement or judgment. If the
Indemnifying Party does not undertake to defend such matter as to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for any Tax benefits, Tax detriments or
insurance proceeds in
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determining the amount of any indemnification obligation under this Section,
provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy. All indemnification payments
under this Section shall be deemed adjustments to the Merger consideration
provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more of
STOCKHOLDERS or by either of the BOXWELLS (whether jointly and severally or
severally) pursuant to Sections 11.1 and 11.3 to URSI, the COMPANY and the
Surviving Corporation will be offset and reduced (but not below zero) by the
Indemnification Threshold. The "Indemnification Threshold" is an amount equal to
two percent (2%) of the aggregate value of the consideration paid to the
STOCKHOLDERS on the Closing Date pursuant to Section 2.2 of this Agreement
unless this Agreement is terminated prior to the Closing Date, in which event
the Indemnification Threshold is an amount equal to two percent (2%) of the
Minimum Value set forth in Annex I. All such amounts otherwise payable by one or
more STOCKHOLDERS or the BOXWELLS in excess of the amount so offset and reduced
shall be paid without offset or reduction pursuant to this Section 11.5(i). This
Section 11.5(i) shall not apply to amounts payable pursuant to Section 11.6. For
purposes of determining the Indemnification Threshold, the URSI Stock shall be
valued at the initial price of the URSI Stock sold to the public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS, BOXWELLS and the COMPANY will be offset
and reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER or either of the BOXWELLS be liable under this
Agreement, including this Section 11, to pay more than one-half the Minimum
Value set forth in Annex I, multiplied by the STOCKHOLDER's percentage ownership
of issued and outstanding COMPANY Stock, with
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respect to Specially Limited Claims. If this Agreement is not terminated prior
to the Closing Date, in no event shall any STOCKHOLDER or either of the BOXWELLS
be liable under this Agreement, including this Section 11, to pay more than
one-half the amount of the proceeds received by STOCKHOLDER pursuant to this
Agreement, calculated as provided in Section 11.5(iv), with respect to Specially
Limited Claims. Specially Limited Claims are all claims that may be made
pursuant to this Agreement, including this Section 11, except claims based on
(a) breach of representations and warranties in Section 5.13, (b) breach of
representations and warranties in Section 5.19 or Section 5.20 or (c) Section
11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER or either of the BOXWELLS be liable under this Agreement, including
this Section 11, for amounts which in the aggregate exceed the Minimum Value set
forth in Annex I, multiplied by STOCKHOLDER's percentage ownership of issued and
outstanding COMPANY Stock. If this Agreement is not terminated prior to the
Closing Date, then notwithstanding any other term of this Agreement, in no event
shall any STOCKHOLDER or either of the BOXWELLS be liable under this Agreement,
including this Section 11, for amounts which in the aggregate exceed the amount
of proceeds received by STOCKHOLDER pursuant to this Agreement. The amount of
proceeds received by STOCKHOLDER shall be calculated (for purposes of Section
11.5(iii) and this Section 11.5(iv)) by adding (a) the cash proceeds paid to
STOCKHOLDER pursuant to Section 2.2 hereof prior to the date that the indemnity
obligation of STOCKHOLDER is paid, plus (b) the net proceeds to STOCKHOLDER from
the sale of STOCKHOLDER's URSI Stock received pursuant to Section 2.2 hereof
prior to the date that the indemnity obligation of STOCKHOLDER or the BOXWELLS
is paid, plus (c) the Fair Market Value (as defined in Annex I) of the unsold
shares of URSI Stock received by STOCKHOLDER pursuant to Section 2.2 prior to
the date that the indemnity obligation of STOCKHOLDER or the BOXWELLS is paid,
valued on the trading day prior to the day the indemnification obligation is
paid.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER or the BOXWELLS shall have any obligation to indemnify URSI or its
successors with respect to a breach of a representation made in Section 5.9 to
the extent that such breach arises either (a) by reason of KPMG
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Peat Marwick LLP's interpretation of generally accepted accounting principles as
reflected in the Financial Statements, or (b) by reason of KPMG Peat Marwick,
having first been provided by COMPANY or STOCKHOLDER with all necessary and
relevant information relating to an item to be set forth on the Financial
Statements, not including or properly presenting such item on the Financial
Statements in accordance with generally accepted accounting principles
consistently applied, provided, however, that the limitation on liability set
forth in subsection (b) above shall not limit the liability of any STOCKHOLDER
or either of the BOXWELLS to URSI with respect to any item if STOCKHOLDER prior
to the Closing Date has actual knowledge (including, if applicable, an actual
knowledge of the generally accepted accounting principles relevant to an item)
of a failure by KPMG Peat Marwick LLP to so include or properly present an item
and did not prior to the Closing Date inform URSI of any such item as to which
STOCKHOLDER has such actual knowledge. The provisions and limitations of this
section shall have no relevance to, and shall not be applied against or
otherwise serve to reduce, any basket or cap provided for in this Agreement.
11.6 Special Tax Indemnity Provisions.
(i) From and after the Closing Date, the STOCKHOLDERS and the
BOXWELLS, jointly and severally, shall indemnify and save URSI, the COMPANY and
any Acquired Party harmless from, and shall be entitled to any refund of, any
and all Taxes (including without limitation any obligation to contribute to the
payment of, or be entitled to share in the refund of, a Tax determined on a
consolidated, combined or unitary basis with respect to a group of corporations
that includes or included the COMPANY or any Acquired Party) which are (i)
imposed on any member (other than the COMPANY or any Acquired Party) of the
consolidated, unitary or combined group which includes or included the COMPANY
or any Acquired Party or (ii) imposed on the COMPANY or any Acquired Party in
respect of its income, business, property or operations or for which the COMPANY
or any Acquired Party may otherwise be liable (A) for any Pre-Closing Period,
(B) resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to
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any items of income or gain of an entity treated as a partnership reported by
the COMPANY or any Acquired Party as a partner, to the extent such items are
properly attributable to periods of the "partnership" ending on or before the
Closing Date, or (G) attributable to any discharge of indebtedness that may
result from any capital contributions by STOCKHOLDERS (or an affiliate of
STOCKHOLDERS) to the COMPANY or any Acquired Party of any intercompany
indebtedness owed by COMPANY to any STOCKHOLDER (or an affiliate of any
STOCKHOLDER), but, in each case, only to the extent such Taxes or the
entitlement to such refund are not reflected on the applicable Company Financial
Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS and the BOXWELLS
shall, jointly and severally, indemnify and save URSI, the COMPANY and any
Acquired Party harmless from (x) any Taxes imposed on URSI, the COMPANY and any
Acquired Party (or any affiliate of URSI, the COMPANY or any Acquired Party)
attributable to any breach of a warranty or representation made by STOCKHOLDERS
in Section 5.22(xx), Section 5.22(xxiv) or Section 5.22(xxv) and (y) any
liability imposed on URSI, the COMPANY and any Acquired Party (or any affiliate
of such companies) attributable to any breach of a warranty or representation
made by STOCKHOLDERS in Section 5.22, excluding Section 5.22(xx), Section
5.22(xxiv) and Section 5.22(xxv).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS and the BOXWELLS
from (x) any Taxes imposed on URSI, the COMPANY or any Acquired Party with
respect to any Post-Closing Period and (y) any liability imposed on STOCKHOLDERS
attributable to any breach of a warranty or representation made by URSI in
Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime or reference rate in effect from time to time as
determined by Bank of America N.T. & S.A., compounded quarterly from the date
incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
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immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
or the BOXWELLS provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to
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the STOCKHOLDERS all written notifications and other written communications from
any Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the indemnification obligation is
paid. No STOCKHOLDER will be entitled to make payment with any other shares of
URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre- Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
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(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
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behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, provided that no
STOCKHOLDER shall be charged with a violation of this Section unless and until
such STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was made,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
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immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations under this
Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of
this Section 13 if URSI and/or any subsidiary thereof shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against URSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
URSI of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of
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any provision of this Section 13. The covenants contained in this Section 13
shall not be affected by any breach of any other provision hereof by any party
hereto, except that upon URSI's admission in writing, or a final judicial
determination which is not the subject of appeal or further appeal by URSI, that
URSI has materially breached a STOCKHOLDER's Employment Agreement (if
applicable), right to have URSI Stock registered under the 1933 Act pursuant to
Section 17.1 or 17.2, or right to receive contingent consideration as provided
in section C of Annex I, and URSI's failure to cure such material breach within
30 days of such admission or final judicial determination, whichever is
applicable, then the covenants contained in this Section 13 with respect to such
STOCKHOLDER will expire. The covenants contained in this Section 13 shall have
no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
URSI, (b) following the Closing Date, as required in the course of performing
their duties for URSI, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under color of law, provided that prior
to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS
shall, if possible, give prior written notice thereof to URSI and provide URSI
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this section,
URSI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting URSI from
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pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. Upon termination of this Agreement prior to the Closing Date
for any reason other than the material breach or default of any STOCKHOLDER or
COMPANY, URSI will return to COMPANY all documents containing confidential
information of COMPANY that were provided to URSI by COMPANY or STOCKHOLDERS and
all summaries, abstractions, projections, pro formas or like material prepared
by URSI incorporating such confidential information. In the event of a breach or
threatened breach by URSI of the provisions of this section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining URSI from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
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15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as URSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION PRIOR TO [insert the first anniversary of the Closing
Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel) by the terms
and conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which
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a majority of the interests therein by value is owned by the STOCKHOLDER and
members of the STOCKHOLDER's family, and (y) which is and continues to be
controlled by the STOCKHOLDER and members of the STOCKHOLDER'S family for the
period set forth in Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933
ACT AND APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
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condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests, provided that URSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to URSI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a reorganization described in Section 368(a)(1)(A)
of the Code. In addition, if URSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than URSI is greater than the number of
such shares which can be offered without adversely affecting the offering, URSI
may reduce the number of shares offered for the accounts of such persons to a
number deemed satisfactory by such managing underwriter, provided that such
reduction shall be made first by reducing the number of shares to be sold by
persons other than URSI, the stockholders named on Annex III hereto, the
stockholders of the Founding Companies, and any person or persons who have
required such registration pursuant to "demand" registration rights granted by
URSI; thereafter, if a further reduction is required, it shall be made first by
reducing the number of shares to be sold by the stockholders named on Annex III
hereto and the stockholders of the Founding Companies, with such further
reduction being made so that to the extent any shares can be sold by
stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of URSI Stock owned by such stockholder
immediately after the Closing, provided that if any stockholder does not wish to
sell all shares such stockholder is permitted to sell, the opportunity to sell
additional shares shall be reallocated in the same manner to those stockholders
named in Annex III hereto and stockholders of the Founding Companies who wish to
sell more shares until no more shares can be sold by such stockholders.
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17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may postpone the
filing of the registration statement for a thirty (30) day period beyond the
period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER
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may request in writing that URSI file a registration statement under the 1933
Act requesting such number of such STOCKHOLDER's shares of URSI Stock as is
required to be sold to pay the difference between the cash proceeds and the
amount of the indemnification obligation, plus legal and other expenses,
including expenses of the offering, provided arrangements are made to URSI's
reasonable satisfaction that the proceeds will be used solely for the purpose of
such indemnification and the payment of related expenses and that arrangements
are made to the reasonable satisfaction of URSI that the proceeds of such sale
will be used solely for the purpose of such indemnification and the payment of
related expenses, and that no such request may be made until after one hundred
eighty (180) days following the Closing Date without the consent of the managing
underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the distribution for
the URSI Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
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<PAGE>
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the Pre-
Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be
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<PAGE>
modified or amended only by a written instrument executed by the STOCKHOLDERS,
the COMPANY and URSI, acting through their respective officers, duly authorized
by their respective Boards of Directors. Any disclosure made on any Schedule
delivered pursuant hereto shall be deemed to have been disclosed for purposes of
any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from personal funds and not from COMPANY funds, the fees, expenses and
disbursements of their counsel and accountants for the STOCKHOLDERS and the
COMPANY incurred in connection with the subject matter of this Agreement or the
Registration Statement. The STOCKHOLDERS shall pay all sales, use, transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he, and not the COMPANY or URSI, will pay all taxes due upon receipt of the
consideration payable to such STOCKHOLDER pursuant to Section 2 hereof.
Notwithstanding the foregoing, any of the above fees, expenses or disbursements
fairly attributable to the Company but payable by the STOCKHOLDERS and incurred
prior to the Pricing Date may be paid from COMPANY funds rather than from
personal funds of the STOCKHOLDERS, provided that the STOCKHOLDERS provide to
URSI, prior to the Pricing Date, a detailed statement setting forth the type and
amount of all such fees, expenses or disbursements so paid, and, provided
further, that the aggregate
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<PAGE>
amount of same shall be deducted, on a dollar-for-dollar basis, from the amount
of cash into which the COMPANY Stock shall be converted pursuant to Section 2.2
hereof. Notwithstanding the foregoing provisions of Section 18.6, URSI shall
further pay or reimburse reasonable costs of counsel or co- counsel for the
Company if and to the extent so mutually agreed in advance between URSI and such
counsel, in circumstances where URSI believes it obtained or may have obtained a
material benefit, in light of market conditions and other factors, by reason of
such counsel or co-counsel expediting the transaction which is the subject of
this Agreement and reducing the time required to complete this Agreement and the
Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
ASC Transportation Services
9330 Jackson Road
Sacramento, CA 95826
Attn: Robert Boxwell
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<PAGE>
and marked "Personal and Confidential" with copies to:
Alan Schostag, Esq.
2360 Professional Drive
Roseville, CA 95661
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the Surviving
Company, including disputes that may arise following termination of this
Agreement,shall be subject to the exclusive jurisdiction and venue of the
California state court of general jurisdiction in Sacramento County, California
(or, if there is federal jurisdiction, then the exclusive jurisdiction and venue
of the United States District Court having jurisdiction over Sacramento County).
The parties hereby consent to the personal and exclusive jurisdiction and venue
of said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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<PAGE>
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
_______________________________ By_______________________________________
Name:
Title:
WITNESS: STOCKHOLDERS:
THE ROBERT B. and JANE D.
BOXWELL FAMILY TRUST
_______________________________ By_______________________________________
Trustee
WITNESS:
_______________________________ _________________________________________
Jane D. Boxwell
WITNESS:
_______________________________ _________________________________________
Robert B. Boxwell
WITNESS ASC TRANSPORTATION SERVICES
_______________________________ By_______________________________________
Name:
Title:
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<PAGE>
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
ASC TRANSPORTATION SERVICES
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $1,650,648 in cash.
2. 137,554 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the
aggregate value of cash and URSI Stock would be $3,301,296.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate
the Merger if the aggregate value of cash and URSI Stock (valued at the IPO
initial public offering price) is less than the Minimum Value of $3,094,965.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
The Robert B. and Jane D.
Boxwell Family Trust 137,554 $1,650,648
------- ---------
TOTALS: 137,554 $1,650,648
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 1 Excess Revenues are greater than zero, then:
<PAGE>
a. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 1 Payout Date.
b. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
c. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
d. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
e. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 2 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date.
b. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
c. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
d. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 3 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date.
<PAGE>
b. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
c. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
4. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 4 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date.
b. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent
consideration and Year 5 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 5 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the revenues reported by
URSI for a fiscal year that are generated by operations acquired by URSI by
means of the Merger, provided that revenues reported by URSI for fiscal year
1998 will be adjusted to reflect revenues of COMPANY from January 1, 1998 until
the Closing Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year
1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year
1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year
2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year
2001.
<PAGE>
f. "Year 5 Actual Revenues" means Revenues for fiscal year
2002.
g. "Year 1 Target Revenues" means $3,641,510.
h. "Year 2 Target Revenues" means the greater of (i) 110% of
Year 1 Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of
Year 2 Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of
Year 3 Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of
Year 4 Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year
1 Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are
equal to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are
zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year
2 Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are
equal to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are
zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year
3 Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are
equal to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are
zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year
4 Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are
equal to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are
zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year
5 Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are
equal to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are
zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
<PAGE>
r. "Year 2 Payout Date" means thirty days (30) after URSI
announces its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2000.
t. "Year 4 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI
announces its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues,
including without limitation decisions regarding the allocation and non-
allocation of capital and other resources, decisions regarding business that
will be accepted or rejected, personnel decisions including decisions to lay off
employees, and decisions to shut down or downsize operations, all without making
any offsetting adjustments to Revenues or contingent consideration, provided
only that such decisions are made in a good faith effort to maximize total
return to the shareholders of URSI to the extent that the same can be realized
without undue risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired by
URSI by means of the Merger are sold, a reasonable adjustment will be made to
these provisions so that the contingent consideration paid to STOCKHOLDERS will
be approximately the same as it would have been if the fiscal year had not been
changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock
to be paid as contingent consideration, URSI Stock will be valued at Fair Market
Value as of the trading day the day before the contingent consideration is paid.
"Fair Market Value" of the URSI Stock as of a date means the market price per
share of such Shares determined by the Board of Directors of URSI as follows:
(a) if the URSI Stock is traded on a stock exchange on the date in question,
then the Fair Market Value will be equal to the closing price reported by the
applicable composite-transactions report for such date; (b) if the URSI Stock is
traded over-the-counter on the date in question and is classified as a national
market issue, then the Fair Market Value will be equal to the last- transaction
price quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean
<PAGE>
between the last reported representative bid and asked prices quoted by the
NASDAQ system for such date; and (d) if none of the foregoing provisions is
applicable, then the Fair Market Value will be determined by the Board of
Directors of URSI in good faith on such basis as it deems appropriate.
11. Despite anything to the contrary in this Annex I or elsewhere in
the Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS
as contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or
the number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
13. The right to be paid contingent consideration is personal and
cannot be assigned by any STOCKHOLDER without the consent of URSI except upon
the death of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon
any STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
The Robert B. and Jane D.
Boxwell Family Trust 100%
---
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of each
Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,850 50% 50%
Keystone Towing,
Inc. 377,624 50% 50%
Northland Auto
Transporters, Inc. 588,435 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Silver State Tow &
Recovery, Inc. 156,043 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,615,811
<PAGE>
EXHIBIT 2.10
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the ____ day of February, 1998
by and among
UNITED ROAD SERVICES, INC.
SILVER STATE TOW & RECOVERY, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE MERGER 1
1.1 Delivery and Filing of Articles of Merger 1
1.2 Effective Time of the Merger 2
1.3 Certificate of Incorporation, Bylaws and Board of Directors
of Surviving Corporation 2
1.4 Certain Information With Respect to the Capital Stock of
the COMPANY and URSI 2
1.5 Effect of Merger 3
2. CONVERSION OF STOCK 4
2.1 Manner of Conversion 4
2.2 Calculation of URSI Shares 4
3. DELIVERY OF SHARES OF URSI STOCK 4
4. PRE-CLOSING AND CLOSING 5
4.1 Pre-Closing 5
4.2 Closing 5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 6
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS 6
5.1 Due Organization 7
5.2 Authorization 7
5.3 Capital Stock of the COMPANY 7
5.4 Transactions in Capital Stock 8
5.5 No Bonus Shares 8
5.6 Subsidiaries 8
5.7 Predecessor Status; etc 8
5.8 Spin-off by the COMPANY 9
5.9 Financial Statements 9
5.10 Liabilities and Obligations 9
5.11 Accounts and Notes Receivable 11
5.12 Permits and Intangibles 11
5.13 Environmental Matters 11
5.14 Real and Personal Property 12
5.15 Significant Customers; Material Contracts and
Commitments 13
5.16 Intentionally Omitted 14
5.17 Insurance 14
5.18 Compensation; Employment Agreements 14
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<PAGE>
Page
----
5.19 Employee Plans 15
5.20 Compliance with ERISA 16
5.21 Conformity with Law 19
5.22 Taxes 19
5.23 No Violations 23
5.24 Government Contracts 24
5.25 Absence of Changes 24
5.26 Deposit Accounts; Powers of Attorney 25
5.27 Validity of Obligations 25
5.28 Relations with Governments 26
5.29 Disclosure 26
(B) Representations and Warranties of
STOCKHOLDERS 26
5.30 Authority; Ownership 26
5.31 Preemptive Rights 27
5.32 No Intention to Dispose of URSI Stock 27
6. REPRESENTATIONS OF URSI 27
6.1 Due Organization 27
6.2 URSI Stock 28
6.3 Validity of Obligations 28
6.4 Authorization 28
6.5 No Conflicts 28
6.6 Capitalization of URSI and Ownership of URSI STOCK 29
6.7 No Side Agreements 29
6.8 Subsidiaries 30
6.9 Business; Real Property; Material Agreements; Financial
Information 30
6.10 Conformity with Law 30
6.11 No Violations 31
6.12 Taxes 31
7. COVENANTS PRIOR TO CLOSING 32
7.1 Access and Cooperation; Due Diligence 32
7.2 Conduct of Business Pending Closing 33
7.3 Prohibited Activities 34
7.4 No Shop 35
7.5 Notice to Bargaining Agents 35
7.6 Termination of Plans 36
7.7 URSI Prohibited Activities 36
7.8 Notification of Certain Matters 36
7.9 Amendment of Schedules 37
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<PAGE>
Page
----
7.10 Cooperation in Preparation of Registration Statement 38
7.11 Examination of Final Financial Statements 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY 39
8.1 Representations and Warranties; Performance of
Obligations 39
8.2 Satisfaction 39
8.3 No Litigation 40
8.4 Stockholders' Release 40
8.5 Opinion of Counsel 40
8.6 Director Indemnification 40
8.7 Registration Statement 40
8.8 Consents and Approvals 41
8.9 Good Standing Certificates 41
8.10 No Waivers 41
8.11 No Material Adverse Change 41
8.12 Transfer Restrictions 41
8.13 Employment Agreements, Consulting Agreements, Leases
and Cosale Agreement 41
8.14 Tax Opinion 41
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI 42
9.1 Representations and Warranties; Performance of
Obligations 42
9.2 No Litigation 42
9.3 Examination of Final Financial Statements 42
9.4 No Material Adverse Effect 42
9.5 STOCKHOLDERS' Release 43
9.6 Satisfaction 43
9.7 Termination of Related Party Agreements 43
9.8 Opinion of Counsel 43
9.9 Consents and Approvals 43
9.10 Good Standing Certificates 44
9.11 Registration Statement 44
9.12 Employment Agreements, Consulting Agreements and
Leases 44
9.13 Repayment of Indebtedness 44
9.14 FIRPTA Certificate 44
9.15 Insurance 44
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10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS 44
10.1 Preservation of Tax and Accounting Treatment 44
10.2 Disclosure 45
10.3 Cooperation in Tax Return Preparation 45
10.4 Tax Return Preparation and Filing 46
10.5 Reorganization Status Information Reporting 47
10.6 Special Definitions Relating to Tax Matters 47
10.7 Directors 48
10.8 Release from Guarantees 48
10.9 Preservation of Plans 48
11. INDEMNIFICATION 49
11.1 General Indemnification by the STOCKHOLDERS 49
11.2 Indemnification by URSI 49
11.3 Third Person Claims 50
11.4 Exclusive Remedy 51
11.5 Limitations on Indemnification 52
11.6 Special Tax Indemnity Provisions 54
11.7 Special Contest Rights Related to Tax Matters 56
11.8 Special Notification Requirements Regarding Tax Dispute 56
11.9 Refunds 57
11.10 Optional Payment with Shares 57
12. TERMINATION OF AGREEMENT 57
12.1 Termination 57
12.2 Liabilities in Event of Termination 58
12.3 Use of Financial Statements 58
13. NONCOMPETITION 58
13.1 Prohibited Activities 58
13.2 Damages 59
13.3 Reasonable Restraint 59
13.4 Severability; Reformation 60
13.5 Independent Covenant 60
13.6 Materiality 61
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 61
14.1 STOCKHOLDERS 61
14.2 URSI 61
14.3 Damages 62
14.4 Survival 62
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15. TRANSFER RESTRICTIONS 62
15.1 Transfer Restrictions 62
15.2 Permitted Transferees 63
16. FEDERAL SECURITIES ACT REPRESENTATIONS 64
16.1 Compliance with Law 64
16.2 Accredited Investors; Economic Risk;
Sophistication 64
17. REGISTRATION RIGHTS 5
17.1 Piggyback Registration Rights 65
17.2 Demand Registration Rights 65
17.3 Registration Procedures 67
17.4 Underwriting Agreement 67
17.5 URSI Stock 68
17.6 Availability of Rule 144 68
17.7 Survival 68
18. GENERAL 68
18.1 Cooperation 68
18.2 Successors and Assigns 68
18.3 Entire Agreement 68
18.4 Counterparts 69
18.5 Brokers and Agents 69
18.6 Expenses 69
18.7 Notices 70
18.8 Governing Law; Forum 71
18.9 Survival of Representations and Warranties 71
18.10 Exercise of Rights and Remedies 72
18.11 Time 72
18.12 Reformation and Severability 72
18.13 Remedies Cumulative 72
18.14 Captions 72
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SCHEDULES and ANNEXES
Annex I - Consideration to Founding Companies
Annex II - Stockholders and Stock Ownership of the
COMPANY
Annex III - Stock Ownership of URSI
Annex IV - Certificate of Incorporation and Bylaws of URSI
Annex V - Form of Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation
Annex VI - Form of Opinion of COMPANY Counsel
Annex VII - Form of Director Indemnification Agreement
Annex VIII A - Form A Employment Agreement
Annex VIII B - Form B Employment Agreement
Annex IX - Form Consulting Agreement
Annex X - Leases
Annex XI - Cosale Agreement
Schedule 1.3(iv) - Officers of the COMPANY
Schedule 5.1 - Qualifications to Do Business
Schedule 5.2 - Required Shareholder Approvals
Schedule 5.3 - Exceptions re Capital Stock of COMPANY
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 - Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.6 - Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.8 - Sales or Spin-offs of Significant Assets
Schedule 5.9 - Initial Financial Statements
Schedule 5.10 - Significant Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and Other
Governmental Authorizations
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Violations of Law, Regulations or Orders
Schedule 5.22 - Tax Returns and Examinations
Schedule 5.22(v) - Federal, State, Local and Foreign Income Tax
Returns Filed
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Schedule 5.23 - Violations of Charter Documents and Material
Defaults
Schedule 5.24 - Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.25 - Changes Since Balance Sheet Date
Schedule 5.26 - Bank Accounts; Powers of Attorney
Schedule 5.30 - Encumbrances on the COMPANY Stock
Schedule 6.9(a) - URSI Agreements
Schedule 6.9(b) - URSI's Financial Statements for the Year Ended
December 31, 1997
Schedule 6.11 - No Violations
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary
Course Between Balance Sheet Date and Closing
Date
Schedule 7.3 - Prohibited Activities
Schedule 7.6 - Plans To Be Terminated By Pricing Date
Schedule 7.7 - Exceptions to Restrictions on URSI
Schedule 9.7 - Termination of Related Party Agreements
Schedule 9.12(a) - Employment Agreements
Schedule 9.12(b) - Consulting Agreements
Schedule 9.12(c) - Leases
Schedule 10.9 - Plans to be Preserved
Schedule 13.1 - Prohibited Activities
Schedule 16.2 - Non-Accredited Investors
Schedule 18.5 - Brokers and Agents
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TABLE OF DEFINITIONS
Defined Term Section
accredited investor 16.2
Acquired Parties 5.22(i)
Affiliate 10.6(a)
Affiliates 5.8
Agreement Preamble
Agreement and Plan of
Reorganization Whereas
Articles of Merger 1.1
Balance Sheet Date 5.9
Charter Documents 5.1
Closing Date 4
Code Whereas
Company Preamble
COMPANY Financial Statements 5.9
COMPANY Stock 1.4(i)
COMPANY's Subsidiaries 5.1
Constituent Corporations Whereas
Consulting Agreement 9.12
controlled group 5.20
Defined Benefit Plan 5.19(iv)
Delaware GCL 1.5
Demand Registration 17.2
Effective Time of the Merger 1.2
Employment Agreements 9.12
Environmental Laws 5.13
ERISA 5.19
Expiration Date 5(A)
Fair Market Value Annex I, C.10
Founding Companies Whereas
group health plans 5.20(v)
Howard Rice 4.1
Indemnification Threshold 11.5(i)
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Period 10.6(b)
IPO 4
Leases 9.12
Material Adverse Effect 5.1
Material Contracts 5.15
Material Documents 5.23
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Merger Whereas
multi-employer pension plan 5.20
1933 Act 5(A)
1934 Act 5(A)
Offered Value 8.7
Other Agreements Whereas
Other Companies Whereas
PBGC 5.19(x)
Plans 5.19
Post-Closing Period 10.6(d)
Pre-Closing 4
Pre-Closing Period 10.6(c)
Pricing Date 4
Qualified Plans 5.19(iii)
Registration Statement 1.4(ii)
Relevant Group 5.22(i)
reportable events 5.20(iii)
SEC 8.2
Stockholders Preamble
Surviving Corporation 1.2
URSI Charter Documents 6.11
URSI Material Adverse Effect 6.1
URSI Material Documents 6.11
URSI Stock 1.4(ii)
URSI's Subsidiaries 6.8
Tax 10.6(e)
Tax Data 10.3
Tax Documentation 10.3
Tax Returns 10.6(f)
Taxing Authority 10.6(g)
Territory 13.1(i)
Third Person 11.3
Transfer Taxes 18.6
Underwriters 5.29
Underwriting Agreement 8.7
URSI Preamble
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the ____ day of February, 1998, by and among UNITED ROAD SERVICES, INC., a
Delaware corporation ("URSI"), SILVER STATE TOW & RECOVERY, INC., a Nevada
corporation (the "COMPANY"), and the stockholders listed on Annex II (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, the respective Boards of Directors of URSI and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into URSI pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware, such transaction sometimes being herein called the
"Merger";
WHEREAS, URSI is entering into other separate agreements (the "Other
Agreements") substantially similar to this Agreement, each of which is entitled
"Agreement and Plan of Reorganization," with each of Absolute Towing and
Transporting, Inc., ASC Transportation Services, Caron Auto Brokers, Inc., Caron
Auto Works, Inc., Falcon Towing and Auto Delivery, Inc., Keystone Towing, Inc.,
Northland Auto Transporters, Inc., Northland Fleet Leasing Company, and
Smith-Christensen Enterprises, Inc. (the "Other Companies") in order to acquire
additional vehicle towing and transport companies (the Other Companies, together
with the COMPANY, are collectively referred to herein as the "Founding
Companies");
WHEREAS, the Boards of Directors of URSI and the COMPANY have
approved and adopted this Agreement as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER.
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause Articles of Merger with respect to the Merger (the
"Articles of Merger") to be signed, verified and delivered to the Secretary of
State of the State of Delaware and, if required, the Articles of Merger or a
similar document to be signed, verified and filed with the relevant authorities
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in the jurisdiction in which the COMPANY is organized, on or before the Closing
Date (as defined in Section 4).
1.2 Effective Time of the Merger. The "Effective Time of the Merger" shall
be the Closing Date as defined in Section 4. At the Effective Time of the
Merger, the COMPANY shall be merged with and into URSI in accordance with the
Articles of Merger, and the separate existence of the COMPANY shall cease. URSI
shall be the surviving party in the Merger and is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of URSI then in effect shall
become the Certificate of Incorporation of the Surviving Corporation; and
subsequent to the Effective Time of the Merger, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the Bylaws of URSI then in effect shall become the Bylaws of
the Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of those persons who constituted the Board of Directors of URSI
immediately prior to the Merger, who shall hold office subject to the provisions
of the laws of the State of Delaware and of the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation shall be the persons
who were officers of URSI immediately prior to the Merger, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the Employment Agreements (as defined in Section 9.12) until
such officers' successors are duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the COMPANY
and URSI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and URSI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital stock
of the COMPANY consists of 2,500 shares of no par common stock ("COMPANY
Stock"), of which 117 shares are issued and outstanding; and
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(ii) immediately prior to the Closing Date, the authorized capital
stock of URSI will consist of 35,000,000 shares of common stock, $.001 par value
("URSI Stock"), of which the number of issued and outstanding shares will be set
forth in the Registration Statement referred to in Section 8.7 (the
"Registration Statement"), and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares will be issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the COMPANY shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the COMPANY shall be merged with and into URSI, and URSI, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of the COMPANY shall cease and, in accordance
with the terms of this Agreement, the Surviving Corporation shall possess all
the rights, privileges, immunities and franchises of a public, as well as of a
private, nature, and all property, all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, all other chooses in action, and all and every other interest of or
belonging to or due to the COMPANY and URSI shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the COMPANY and URSI. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the COMPANY and URSI and any
claim existing, or action or proceeding pending, by or against the COMPANY or
URSI may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or URSI shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and URSI shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK.
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
Stock into URSI Stock shall be as follows:
As of the Effective Time of the Merger:
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(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
deemed to represent (1) that number of shares of URSI Stock determined pursuant
to Section 2.2 below and (2) the right to receive the amount of cash determined
pursuant to Section 2.2 below, such shares and cash to be distributed to
STOCKHOLDERS as provided in Part I of Annex I hereto;
(ii) all shares of COMPANY Stock that are held by COMPANY as
treasury stock or owned by any COMPANY Subsidiary shall be cancelled and retired
and no shares of URSI Stock or other consideration shall be delivered or paid in
exchange therefor.
At the Effective Time of the Merger, URSI shall have no class of
capital stock issued and outstanding which, as a class, shall have any rights or
preferences senior to the shares of URSI Stock received by the STOCKHOLDERS,
including, without limitation, any rights or preferences as to dividends or as
to the assets of URSI upon liquidation or dissolution or as to voting rights.
2.2 Calculation of URSI Shares. All COMPANY Stock shall be converted, as a
result of the Merger, into the number of shares of URSI Stock and the amount of
cash determined as set forth in Part I to Annex I attached hereto. The URSI
Stock and the amount of cash to be received, respectively, by the stockholders
of each of the Other Companies will be determined as set forth in Part II to
Annex I, provided that the stockholders of certain Other Companies may receive
URSI Stock or cash or both that is contingent upon future revenues, and Part II
to Annex I does not describe such contingent URSI Stock.
3. DELIVERY OF SHARES OF URSI STOCK.
3.1 At or after the Effective Time of the Merger:
(i) the STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of URSI Stock and the
amount of cash calculated pursuant to Section 2.2 above; and
(ii) until the certificates representing COMPANY Stock have been
surrendered by the STOCKHOLDERS and replaced by the URSI Stock, the certificates
for COMPANY Stock shall, for all corporate purposes, be deemed to evidence the
ownership of the number of shares of URSI Stock and cash which such STOCKHOLDER
is entitled to receive as a result of the Merger, as
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set forth in Section 2.2, notwithstanding the number of shares of COMPANY Stock
such certificates represent.
3.2 The STOCKHOLDERS shall deliver to URSI at Pre-Closing (as defined
below in Section 4) the certificates representing COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the STOCKHOLDERS'
expense, affixed and cancelled. The STOCKHOLDERS agree promptly to cure any
deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. PRE-CLOSING AND CLOSING.
4.1 Pre-Closing. On the date (the "Pricing Date") on which the public
offering price of the shares of URSI Stock in the initial public offering of
URSI Stock (the "IPO") described in the Registration Statement is determined,
the parties shall take all actions necessary to effect (i) the Merger
(including, if permitted by applicable state law, the filing with the
appropriate state authorities of the Articles of Merger and any similar document
to become effective on the Closing Date (as defined below)), (ii) the conversion
of shares of COMPANY Stock into shares of URSI Stock and (iii) the delivery of
shares of URSI Stock (hereinafter referred to as the "Pre-Closing"); provided,
that the actual Merger, the conversion of shares of COMPANY Stock into shares of
URSI Stock and the delivery of shares of URSI Stock shall not take place until
the Closing Date as herein provided. The Pre-Closing shall take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation ("Howard Rice") at 3 Embarcadero Center, 7th Floor, San Francisco,
CA 94111.
4.2 Closing. On the date when the closing with respect to the IPO occurs
("the Closing Date"), the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective, and all
transactions contemplated by this Agreement, including the conversion of shares
of COMPANY Stock into shares of URSI Stock, the delivery of shares of URSI
Stock, and the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger, shall occur and be deemed to be completed. If so
requested by any STOCKHOLDER at or prior to the Pre-Closing, URSI will use its
best efforts to cause all cash to be paid to such STOCKHOLDER on the CLOSING
DATE to be paid by the Underwriters (as defined in Section 5.29) by initiating a
wire transfer payment pursuant to instructions included in STOCKHOLDER's
request. After the Pre-Closing and until the Closing Date, no party may
withdraw, terminate or rescind any
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delivery made at the Pre-Closing unless this Agreement is terminated as provided
in Section 12. All documents delivered at the Pre-Closing shall be held by
Howard Rice for final delivery on the Closing Date as directed by the parties
and their counsel at the Pre-Closing, provided only that the Articles of Merger
and any similar document may be filed to become effective on the Closing Date.
Should the Agreement be terminated as provided in Section 12 prior to the
Closing Date, the parties shall take all steps necessary to rescind any such
filings, Howard Rice shall return all documents delivered at the Pre-Closing to
the parties who delivered the same, all such deliveries at the Pre-Closing will
be rescinded and a nullity, the Merger shall not become effective, the shares of
COMPANY Stock will not be converted into URSI Stock, and shares of URSI Stock
will not be delivered to STOCKHOLDERS. The documents delivered at Pre-Closing
shall include documents required to rescind, prior to the Closing Date, any
filing of the Articles of Merger and any similar document.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
(A) Representations and Warranties of COMPANY and STOCKHOLDERS. The
COMPANY and each of the STOCKHOLDERS jointly and severally represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.9 hereof, shall
be true at the time of Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date for a period of
four (4) years (the last day of such period being hereinafter called the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 5.13 hereof shall survive the Closing Date for a period of eight (8)
years, the last day of which shall be deemed to be the Expiration Date for
Section 5.13, (ii) the warranties and representations set forth in Sections 5.19
and 5.20 hereof shall survive the Closing Date until such date as the
limitations period has run for each act, inaction, fact, event or circumstance
which constitutes a breach thereof, which date shall be deemed to be the
Expiration Date for Sections 5.19 and 5.20, (iii) the warranties and
representations set forth in Section 5.22 hereof shall survive the Closing Date
until such date as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which date shall be deemed to be the Expiration
Date for Section 5.22, and (iv) solely for purposes of Section 11.1(iii) hereof,
all warranties and representations shall survive until such date as the
limitations period has run under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and all other applicable Federal or state securities laws, which date shall be
deemed to be the Expiration Date for purposes of Section 11.1(iii) hereof.
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5.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY (the "COMPANY's Subsidiaries") set forth on Schedule 5.6 is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as disclosed on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY and the COMPANY's Subsidiaries, taken as a whole (a "Material
Adverse Effect"). Schedule 5.1 contains a list of all jurisdictions in which the
COMPANY is authorized or qualified to do business. True, complete and correct
copies of the Certificate of Incorporation and Bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the "Charter
Documents"), certified by the Secretary or Assistant Secretary of the COMPANY,
are all attached hereto as Schedule 5.1. A true, complete and correct copy of
each Certificate of Incorporation included in the Charter Documents, certified
by the Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the COMPANY, as
applicable, shall be delivered to URSI at the Pre-Closing. Except as set forth
on Schedule 5.1, the minute books of the COMPANY and each of the COMPANY's
Subsidiaries, as heretofore made available to URSI, are correct and complete in
all material respects.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS and in
the amounts set forth in Annex II and further, except as set forth on Schedule
5.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind. All
of the issued and outstanding shares of the capital stock of the COMPANY have
been duly authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the STOCKHOLDERS and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder.
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5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
neither the COMPANY nor any of the COMPANY's Subsidiaries has acquired any
COMPANY Stock since January 1, 1993. No option, warrant, call, conversion right
or commitment of any kind exists which obligates the COMPANY or any of the
COMPANY's Subsidiaries to issue any of their respective authorized but unissued
capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4,
there has been no transaction or action taken with respect to the equity
ownership of the COMPANY, or any of the COMPANY's Subsidiaries, in contemplation
of the transactions described in this Agreement.
5.5 No Bonus Shares. Except as set forth in Schedule 5.5, since January 1,
1995 none of the shares of COMPANY Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's Subsidiaries and sets forth the number of shares and class of the
authorized capital stock of each of the COMPANY's Subsidiaries and the number of
shares of each of the COMPANY's Subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned by the
COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth in Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies for the past five years of the COMPANY,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any of the COMPANY's Subsidiaries or any other person or entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the COMPANY
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("Affiliates") other than in the ordinary course of business, within the
preceding two years.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's Balance Sheet as of December 31, 1997, and Statement of
Operations for the one-year period ended December 31, 1997 (December 31, 1997
being hereinafter referred to as the "Balance Sheet Date"). Except as set forth
on Schedule 5.9, such Balance Sheet as of December 31, 1997 presents fairly the
financial position of the COMPANY (and each of the COMPANY's Subsidiaries on a
consolidated basis) as of the dates indicated thereon, and such Statement of
Operations presents fairly the results of operations for the period indicated
thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to URSI an
accurate list (Schedule 5.10) with respect to the COMPANY and its Subsidiaries
of:
(i) all liabilities which are reflected on the balance sheet of the
COMPANY at the Balance Sheet Date;
(ii) all liabilities of the COMPANY not reflected on the balance
sheet of the Company at the Balance Sheet Date exceeding $10,000 which either
(x) should have properly been accrued on the balance sheet of the Company as of
the Balance Sheet Date in accordance with generally accepted accounting
principles consistently applied, or (y) are liabilities of the nature described
in Section 5.13, Section 5.20 and/or Section 5.22 (excluding items subject to
any knowledge qualifications contained in any of these sections);
(iii) to the knowledge of the COMPANY, all liabilities not reflected
on the balance sheet of the Company at the Balance Sheet Date exceeding $10,000
and existing as of the Balance Sheet Date which are not otherwise described in
the immediately preceding subclause (ii);
(iv) in the case of any supplement or amendment pursuant to Section
7.9, all liabilities which were incurred after the cutoff date for Schedule 5.10
or any supplement or amendment thereto and were incurred other than in the
ordinary course of business or exceed $10,000 if (and only if) such liabilities
would either be accrued on the balance sheet of the COMPANY in accordance with
generally accepted accounting principles consistently applied if such balance
sheet were being prepared immediately prior to Closing or if such liabilities
represent liabilities of the nature described in Section 5.13, Section 5.20
and/or Section 5.22 (excluding items subject to any knowledge qualifications
contained in any of these sections); and
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(v) to the knowledge of the COMPANY, in the case of any supplement
or amendment pursuant to Section 7.9, all liabilities which were incurred after
the cutoff date for Schedule 5.10 or any supplement or amendment thereto, and
were incurred other than in the ordinary course of business or exceed $100,000
and are not otherwise described in the immediately preceding subclause (iv).
Any reference to "all liabilities" in the preceding subclauses (i) through (v)
inclusive shall mean, in each such instance, all liabilities of the COMPANY (or
the COMPANY'S Subsidiaries) of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise. The COMPANY
has also delivered to URSI on Schedule 5.10, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may be
payable. For each such contingent liability, the COMPANY has provided to URSI
the following information:
(vi) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(vii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(viii) the date such claim, suit or proceeding was instituted.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to URSI an
accurate list (Schedule 5.11) of the accounts and notes receivable of the
COMPANY (including the COMPANY's Subsidiaries), as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such
accounts and notes are collectible in the amount shown on Schedule 5.11, net of
reserves reflected in the balance sheet as of the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY and each of the COMPANY's
Subsidiaries holds all licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle
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titles and current registrations), fuel permits, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights, the absence of any of which would have a Material Adverse Effect.
The COMPANY has delivered to URSI an accurate list and summary description
(Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, provided that copyrights need not be listed unless registered.
To the knowledge of the COMPANY, the licenses, franchises, permits and other
governmental authorizations listed on Schedule 5.12 are valid, and neither the
COMPANY nor any of the COMPANY's Subsidiaries has received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY
(including the COMPANY's Subsidiaries) has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in applicable permits, licenses, orders, approvals, variances, rules
and regulations and is not in violation of any of the foregoing except where
such non-compliance or violation would not have a Material Adverse Effect.
Except as specifically provided in Schedule 5.12, the transactions contemplated
by this Agreement will not result in a default under or a breach or violation
of, or have a Material Adverse Effect upon the rights and benefits afforded to
the COMPANY (including the COMPANY's Subsidiaries) by, any such licenses,
franchises, permits or government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, and
except to the extent that noncompliance with any Environmental Law (as defined
below), either singly or in the aggregate, does not have a Material Adverse
Effect, (i) the COMPANY and the COMPANY's Subsidiaries have complied with and
are in compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to protection of the air, water or land or to the
generation, storage, use, handling, transportation, treatment or disposal of
Solid Wastes, Hazardous Wastes or Hazardous Substances (as such terms are
defined in any applicable Environmental Law); (ii) the COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits and other
approvals necessary to treat, transport, store, dispose of or otherwise handle
Solid Wastes, Hazardous Wastes or Hazardous Substances and have reported, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY or any of the COMPANY's Subsidiaries where Solid Wastes,
Hazardous Wastes or Hazardous Substances have been treated, stored, used,
disposed of or otherwise handled; (iii) there have been no releases (as defined
in Environmental Laws) at, from, under, in or on any property owned or
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operated by the COMPANY or any of the COMPANY's Subsidiaries except as permitted
by Environmental Laws; (iv) to the knowledge of the COMPANY there is no on-site
or off-site location to which the COMPANY or any of the COMPANY's Subsidiaries
has transported or disposed of Solid Wastes, Hazardous Wastes or Hazardous
Substances or arranged for the transportation of Solid Wastes, Hazardous Wastes
or Hazardous Substances, which site is the subject of any federal, state, local
or foreign enforcement action or any other investigation which could lead to any
claim against the COMPANY, any of the COMPANY's Subsidiaries or URSI for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) to the
knowledge of the COMPANY the COMPANY has no contingent liability in connection
with any release of any Solid Waste, Hazardous Waste or Hazardous Substance into
the environment. Schedule 5.13 lists all releases of Hazardous Wastes or
Hazardous Substances by the COMPANY.
5.14 Real and Personal Property. The COMPANY has delivered to URSI an
accurate list (Schedule 5.14) of (x) all real and personal property included (or
that will be included) on the balance sheet of the COMPANY, (y) all other real
and personal property of the COMPANY (including the COMPANY's Subsidiaries) with
a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and (z) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving real or
personal property having a value in excess of $2,500, including in the case of
(z) true, complete and correct copies of all such leases and including in cases
(x), (y) and (z) an indication as to which real and personal property is
currently owned, or was formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as shown on Schedule 5.14, all
of the trucks and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedule 5.14 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.14 are in full force and effect and constitute valid and binding agreements on
the COMPANY (or a COMPANY Subsidiary, as applicable), and to the knowledge of
the COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their respective
terms. All fixed assets used by the COMPANY and the COMPANY's Subsidiaries that
are material to the operation of their respective businesses are either owned by
the COMPANY or the COMPANY's Subsidiaries or leased under an agreement indicated
on Schedule 5.14. Schedule 5.14 shall, without limitation, contain true,
complete and correct copies of all title reports and title insurance policies
received or owned by the COMPANY or the COMPANY's Subsidiaries. The COMPANY has
also provided in Schedule 5.14 a summary description of all plans or
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projects which have been memorialized in any written or electronic document or
file and involves the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, with
respect to which the COMPANY (or any of the COMPANY's Subsidiaries) has made any
expenditure in the two-year period prior to the date of the Agreement in excess
of $10,000, or which if pursued by the COMPANY (or such Subsidiary) would
require additional expenditures of capital in excess of $10,000. Except as set
forth on Schedule 5.14 and except for liens excepted in Section 7.3(vi)(1) and
(3), there are no liens against the COMPANY's properties.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to URSI an accurate list (Schedule 5.15) of (i) all
significant customers (i.e., those customers representing five percent (5%) or
more of the COMPANY's revenues for the 12 months ended on the Balance Sheet
Date, or who have paid to the COMPANY $100,000 or more over any four consecutive
fiscal quarters in the three years ended on the Balance Sheet Date) and (ii) all
contracts requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $10,000 ("Material
Contracts") to which the COMPANY or any of its Subsidiaries is a party or by
which any of them or any of their respective properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
leases, liens, pledges or other security agreements) (a) as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to URSI, except
that leases set forth on Schedule 5.14 need not be set forth on Schedule 5.15.
Except to the extent set forth on Schedule 5.15, (i) none of the COMPANY's
(including the COMPANY's Subsidiaries) significant customers has cancelled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel any Material Contract or substantially
reduce utilization of the services provided by the COMPANY (including the
COMPANY's Subsidiaries), and (ii) the COMPANY and the COMPANY's Subsidiaries
have complied with all material commitments and obligations pertaining to any
Material Contract, and are not in default under any such Material Contract, and
no notice of default has been received, and no Stockholder or any affiliate of
any Stockholder is a party to any such Material Contract. Except as set forth in
Schedule 5.15, the COMPANY and the COMPANY's Subsidiaries have not been the
subject of any election in respect of union representation of employees and are
not bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.15, no employees of the COMPANY or its Subsidiaries are
represented by any labor union or covered by any
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collective bargaining agreement and no campaign to establish such representation
has ever occurred or is in progress. There is no pending or, to the COMPANY's
knowledge, threatened labor dispute involving the COMPANY (including the
COMPANY's Subsidiaries) and any group of its employees, nor has the COMPANY
(including the COMPANY's Subsidiaries) experienced any labor interruptions over
the past three years, and the COMPANY considers its relationship with employees
to be good.
5.16 Intentionally Omitted.
5.17 Insurance. The COMPANY has delivered to URSI an accurate list
(Schedule 5.17) as of the Balance Sheet Date of all insurance policies carried
by the COMPANY (including the COMPANY's Subsidiaries) and, except as set forth
on Schedule 5.17, has delivered to URSI an accurate list (attached to Schedule
5.17) of all insurance loss runs or worker's compensation claims received for
the past three (3) policy years. Also attached to Schedule 5.17 are true,
complete and correct copies of all policies currently in effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY
(including any of the COMPANY's Subsidiaries) has ever been cancelled by the
insurance company, and the COMPANY (including such COMPANY's Subsidiaries) has
never submitted a written application for insurance and been denied coverage.
5.18 Compensation; Employment Agreements. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.18) showing all officers, directors and
key managers of the COMPANY (including the COMPANY's Subsidiaries), listing all
employment agreements with such officers, directors and key managers and the
rate of compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each of such persons as of (i) the Balance
Sheet Date and (ii) the date hereof. The COMPANY has provided to URSI true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Since the Balance Sheet Date there have been no increases in the
compensation payable or any special bonuses to any officer, director or key
manager, except as listed on Schedule 5.18.
5.19 Employee Plans. Schedule 5.19 attached hereto sets forth complete and
accurate lists of all employee benefit plans, all employee welfare benefit
plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
COMPANY (or any of the COMPANY's Subsidiaries), or to which any COMPANY (or any
of the COMPANY's Subsidiaries) currently
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contributes, or has an obligation to contribute in the future (including,
without limitation, benefit plans or arrangements that are not subject to ERISA,
such as employment agreements and any other agreements containing "golden
parachute" provisions and deferred compensation agreements), together with a
classification of employees covered thereby (collectively, the "Plans").
Schedule 5.19 sets forth all of the Plans that have been terminated within the
past six years. The COMPANY has heretofore delivered to URSI correct and
complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust agreement and/or
insurance contracts, if any, forming a part of such Plan and all amendments
thereto; and the resolutions and agreements, if any by which the COMPANY (or any
of the COMPANY's Subsidiaries) adopted such Plan.
(ii) All written, and descriptions of all oral, employment,
termination, and severance agreements, contracts, arrangements and
understandings listed in Schedule 5.19.
(iii) Sample benefit distribution forms that pertain to all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code.
(iv) The most recent actuarial report and the most recent executed
Form PBGC-1 with respect to each Plan that is a defined benefit pension plan as
defined in Section 414(j) of the Code (a "Defined Benefit Plan").
(v) Forms 5500 or, as applicable Forms 5500-C/R, filed with respect
to the three most recent plan years of each Plan, and all schedules thereto.
(vi) The most recent determination letter issued by the Internal
Revenue Service regarding the qualified status of each Qualified Plan.
(vii) The most recent accountant's report, if any, with respect to
each Plan.
(viii) The most recent summary plan description, and any subsequent
summaries of material modifications, with respect to each Plan.
(ix) The bond required by Section 412 of ERISA, if any.
(x) All documents required to be filed with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation (the "PBGC"), or distributed
to participants and beneficiaries in connection with the termination of any
Qualified Plan listed on Schedule 5.19 as terminated.
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5.20 Compliance with ERISA. Except for the Plans, neither the COMPANY nor
any of the COMPANY's Subsidiaries maintains or sponsors, or is a contributing
employer to, a pension, profit-sharing, deferred compensation, stock option,
employee stock purchase or other employee benefit plan, employee welfare benefit
plan, or any other arrangement with their respective employees, whether or not
subject to ERISA. All Plans are in all material respects in compliance with all
applicable provisions of ERISA and the regulations issued thereunder, the Code
and the regulations issued thereunder, as well as with all other applicable
laws, and have been administered, operated and managed in accordance with the
governing documents. All Qualified Plans are qualified under Section 401(a) of
the Code and have been determined by the Internal Revenue Service to be so
qualified or application for determination letters have been timely submitted to
the Internal Revenue Service and nothing has occurred since the date of each
Qualified Plan's most recent determination letter that would adversely affect
such Plan's tax-qualified status. To the extent that any Qualified Plans have
not been amended to comply with applicable law, the remedial amendment period
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within one hundred twenty (120) days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
STOCKHOLDERS; (ii) any Plan; or (iii) the COMPANY (including any of the
COMPANY's Subsidiaries) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and no circumstances exist pursuant to which
the COMPANY (including any of the COMPANY's Subsidiaries) could have any direct
or indirect liability whatsoever (including being subject to any statutory lien
to secure payment of any such liability), to the PBGC under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty with respect to
any plan now or hereinafter maintained or contributed to by the COMPANY or any
member of a "controlled group" (as defined in Section 4001(a)(14) of ERISA) that
includes the COMPANY; and neither the COMPANY (including any of the COMPANY's
Subsidiaries) nor any member of a "controlled group" (as defined above) that
includes the COMPANY currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further, except as set
forth in Schedule 5.20:
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(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without a determination by
the Internal Revenue Service that such action does not adversely affect the
tax-qualified status of such Qualified Plan;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Defined Benefit Plan, as of the
Closing Date, shall equal or exceed the actuarial present value of all accrued
pension benefits under any such Defined Benefit Plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the funding of
terminated Defined Benefit Plans;
(v) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(l) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the COMPANY (including any of the COMPANY's Subsidiaries) and the
STOCKHOLDERS have complied in all material respects (and on the Closing Date
will have complied in all material respects) with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the COMPANY (including the COMPANY's
Subsidiaries) has not incurred (and will not incur) any direct or indirect
liability and is not (and will not be) subject to any loss, assessment, excise
tax penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY
(including any of the COMPANY's Subsidiaries) or the STOCKHOLDERS, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against the COMPANY (including
any of the COMPANY's Subsidiaries) or the STOCKHOLDERS with respect to such
group health plans;
(vi) The COMPANY (including any of the COMPANY's Subsidiaries) is
not now nor has it been within the past five years a member of a "controlled
group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the COMPANY's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
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adjudication proceeding, audit or any governmental or other proceeding, audit or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of prior periods;
(ix) The COMPANY (including any of the COMPANY's Subsidiaries) has
not incurred liability under Section 4062 of ERISA;
(x) Each Qualified Plan that is listed as terminated on Schedule
5.19 was terminated in compliance with all applicable requirements of ERISA and
the Code;
(xi) Except for any Qualified Plan that is categorized on Schedule
5.19 as having been merged with another Qualified Plan, no Qualified Plan of the
COMPANY (including any of the COMPANY's Subsidiaries) has been merged during the
six years immediately before the Closing Date;
(xii) Each Qualified Plan that is categorized on Schedule 5.19 as
having been merged was merged in compliance with all applicable requirements of
ERISA and the Code;
(xiii) Apart from health benefits provided to former employees under
Section 4980B of the Code and Part 6 of Title I(B) of ERISA, the COMPANY
(including any of the COMPANY's Subsidiaries) has no obligation to provide
health or medical benefits to anyone other than its active employees;
(xiv) The COMPANY (including any of the COMPANY's Subsidiaries) does
not sponsor, contribute to, or have any obligation to contribute to any
voluntary employees beneficiary association, as described in Section 501(c)(9)
of the Code; and
(xv) Except as set forth in Section 5.19, the consummation of the
transactions contemplated hereby will not result in any obligation to pay any
employee of the COMPANY (including any of the COMPANY's Subsidiaries) severance
or termination benefits so long as such employee remains employed by the COMPANY
(including any of the COMPANY's Subsidiaries) after the Closing Date.
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5.21 Conformity with Law. Except to the extent set forth on Schedule 5.21,
the COMPANY (including the COMPANY's Subsidiaries) is not in violation of any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth in Schedule 5.10, there are
no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY (including all of
the COMPANY's Subsidiaries) has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
which would have a Material Adverse Effect.
5.22 Taxes. Except as set forth in Schedule 5.22,
(i) All Tax Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with any
Taxing Authority have been duly filed, and each such Tax Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information, including the tax basis and recovery periods for assets, required
to be reported thereon. The Company has furnished or made available to URSI
complete and accurate copies of all income and franchise tax returns, and any
amendments thereto, filed by the Company and any Acquired Party for all taxable
years ending on or after December 31, 1994. All Taxes (whether or not shown on
any Tax Return and whether or not assessed) owed by the COMPANY, its
Subsidiaries and any member of a Relevant Group (collectively, the "Acquired
Parties") have been paid.
(ii) The provisions for Taxes due by the COMPANY and its
Subsidiaries (as opposed to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for, and adequate to cover, all unpaid Taxes of such
Acquired Party.
(iii) No Acquired Party is a party to any current agreement
extending the time within which to file any Tax Return. No claim has ever been
made by any Taxing Authority in a jurisdiction in which an Acquired
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Party does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with respect to
any Acquired Party for all taxable periods ended on or after December 31, 1993,
indicates those Tax Returns, if any, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Each Acquired Party has
delivered to URSI complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that would not be deductible by reason of
the application of Section 280G of the Code.
(viii) No Acquired Party is a party to or has any ongoing liability
under any Tax allocation or sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the meaning of Section
168 of the Code. No Acquired Party is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986, or to any "long-term contract"
within the meaning of Section 460 of the Code.
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(x) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes.
(xi) To the knowledge of the COMPANY, there are no accounting method
changes, or proposed or threatened accounting method changes, of any Acquired
Party that could give rise to an adjustment under Section 481 of the Code for
periods after the Closing Date.
(xii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiii) Each Acquired Party has substantial authority for the
treatment of, or has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of
the Code) on its federal income Tax Returns, all positions taken on its relevant
federal income Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(xiv) No Acquired Party has any liability for Taxes of any Person
other than such Acquired Party (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xv) No consent has been filed relating to the Company or any
Acquired Party pursuant to Section 341(f) of the Code, nor has the Company or
any Acquired Party made any tax election that would materially increase the
amount of Taxes payable by the Company or any Acquired Party in any Post-Closing
Period.
(xvi) There is no current plan or intention by any STOCKHOLDER to
sell, exchange, or otherwise dispose of a number of shares of URSI Stock
received in the Merger that would reduce the STOCKHOLDERS' ownership of URSI
Stock to a number of shares having a value, as of the Closing Date, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of the
COMPANY, respectively, as of the same date. For purposes of this representation,
shares of COMPANY Stock exchanged for cash or other property, shares of the
COMPANY Stock surrendered by dissenters, if any, and shares of COMPANY Stock
exchanged for cash in lieu of fractional shares of URSI Stock will be treated as
outstanding COMPANY Stock on the date of the transaction. Moreover, shares of
COMPANY Stock and shares of URSI Stock held by STOCKHOLDERS and otherwise sold,
redeemed, or disposed of on or after January 1, 1997, including after the
Closing Date, will be considered in making this representation.
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(xvii) The STOCKHOLDERS and the COMPANY and, to the knowledge of the
COMPANY and STOCKHOLDERS, URSI will each pay their respective expenses, if any,
incurred in connection with the Merger in accordance with Section 18.6 hereof.
(xviii) There is no intercorporate indebtedness existing between
URSI and the COMPANY that was issued, acquired, or will be settled at a
discount.
(xix) The COMPANY is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xx) The fair market value of the assets of the COMPANY transferred
to URSI exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(xxi) The liabilities of the COMPANY assumed by URSI and the
liabilities to which the transferred assets are subject were incurred by the
COMPANY in the ordinary course of its business.
(xxii) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xxiii) None of the compensation received by any
STOCKHOLDER-employees of the COMPANY will be separate consideration for, or
allocable to, any of their shares of the COMPANY; none of the shares of URSI
Stock received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
(xxiv) The fair market value of the URSI Stock and other
consideration to be received by each STOCKHOLDER pursuant to the Merger, will be
approximately equal to the fair market value of the COMPANY Stock surrendered in
the Merger.
(xxv) To the knowledge of the STOCKHOLDERS, the fair market value as
of the Closing Date of the right of the STOCKHOLDERS to receive contingent
consideration pursuant to Section 2.2 of the Agreement will not exceed 7.5% of
the aggregate consideration to be received by such STOCKHOLDERS pursuant to the
Merger.
(xxvi) Intentionally Omitted.
(xxvii) Intentionally Omitted.
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Certain of the defined terms used in this Section 5.22 have the
meaning ascribed to them in Section 10.
5.23 No Violations. Neither the COMPANY (including the COMPANY's
Subsidiaries) nor, to the knowledge of the COMPANY, any other party thereto is
(i) in violation of any Charter Document or (ii) in default under any material
lease, instrument, agreement, license, or permit to which it is a party or by
which its properties are bound (the "Material Documents"); and, except as set
forth in the schedules and documents attached to this Agreement, (a) to the
knowledge of the COMPANY the transactions contemplated hereby will not have a
Material Adverse Effect on the rights and benefits of the COMPANY (including the
COMPANY's Subsidiaries) under the Material Documents and (b) except as set forth
on Schedule 5.23, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.23, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY (including the COMPANY's Subsidiaries) is not now a party to any
governmental contracts subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been with respect to the COMPANY and the
COMPANY's Subsidiaries:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption, purchase or
other acquisition of any of its capital stock, except any declaration of
dividends payable by any COMPANY Subsidiary to the COMPANY;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its respective
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officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees (other than
the STOCKHOLDERS) in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material Adverse
Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer any material assets, property or rights of any of its respective
business to any person, including, without limitation, the STOCKHOLDERS and
their affiliates, other than distributions, sales or transfers in the ordinary
course of business to persons other than the STOCKHOLDERS and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any indebtedness or
obligation of any STOCKHOLDERS or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or assets outside of the
ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any transaction by it outside the ordinary course of their
respective businesses; or
(xii) any cancellation or termination of a Material Contract.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
URSI an accurate schedule (Schedule 5.26) as of the date of the Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
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(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors and shareholders of
the COMPANY and this Agreement has been duly and validly authorized by all
necessary corporate action and, assuming due authorization, execution and
delivery by URSI, is a legal, valid and binding obligation of the COMPANY,
enforceable against the COMPANY in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect.
5.29 Disclosure. Without waiving any rights under Section 8.7 or Section
12.1, the COMPANY and the STOCKHOLDERS acknowledge and agree that (i) there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
neither URSI nor any of its officers, directors, agents or representatives nor
any prospective underwriters in the IPO (the "Underwriters") shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or
associated with the COMPANY for any failure of the Registration Statement to
become effective, or of the IPO to occur at a particular price or within a
particular range of prices or to occur at all; and (iii) the decision of
STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent to
the proposed Merger, has been made independent of, and without reliance upon,
any statements, opinions or other communications of, or due diligence
investigations which have been or
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will be made or performed by any prospective Underwriter, relative to URSI or
the prospective IPO. The Underwriters shall have no obligation to the
STOCKHOLDERS with respect to any disclosure contained in the Registration
Statement.
(B) Representations and Warranties of STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants that the representations and warranties set
forth below are true as of the date of this Agreement and, subject to Section
7.9 hereof, shall be true at the time of Pre-Closing and on the Closing Date,
and that such representations and warranties as made on the Closing Date shall
survive until the Expiration Date.
5.30 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex II as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.30 hereof, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.31 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or URSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire URSI Stock pursuant to (i) this Agreement or (ii) any option granted
by URSI.
5.32 No Intention to Dispose of URSI Stock. There is no current plan or
intention by such STOCKHOLDER to sell, exchange or otherwise dispose of a number
of shares of URSI Stock received in the Merger that would reduce such
STOCKHOLDER's ownership of URSI stock to a number of shares having a value, as
of the Closing Date, of less than fifty percent (50%) of the value of all of the
formerly outstanding stock of the COMPANY held by such STOCKHOLDER immediately
prior to the Merger.
6. REPRESENTATIONS OF URSI.
URSI represents and warrants that (i) all of the following
representations and warranties are true at the date of this Agreement and shall
be true at the time of Pre-Closing and the Closing Date and that such
representations and warranties shall survive the Closing Date until the
Expiration Date and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO the STOCKHOLDERS actually
incur liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period.
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6.1 Due Organization. URSI is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified under all applicable laws, regulations, and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of URSI and on URSI's
Subsidiaries (as defined in Section 6.8 herein), taken as a whole (a "URSI
Material Adverse Effect"). True, complete and correct copies of the Certificate
of Incorporation and the Bylaws of URSI, certified by the Secretary or an
Assistant Secretary of URSI, are attached hereto as Annex IV. A true, complete
and correct copy of the Certificate of Incorporation of URSI, certified by the
Secretary of State of the State of Delaware, shall be delivered at the
Pre-Closing.
6.2 URSI Stock. The URSI Stock to be delivered to the STOCKHOLDERS on the
Closing Date shall constitute valid and legally issued shares of URSI, fully
paid and nonassessable, and except as set forth in this Agreement, will be owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind created by URSI, and
will be legally equivalent in all respects to the URSI Stock issued and
outstanding as of the date hereof. The shares of URSI Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.3 Validity of Obligations. The execution and delivery of this Agreement,
the Employment Agreements (as defined in Section 9.12), the Consulting
Agreements (as defined in Section 9.12) and the Leases (as defined in Section
9.12) by URSI and the performance by URSI of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the Board
of Directors of URSI, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and validly
authorized by all necessary corporate action, duly executed and delivered and
are or will be legal, valid and binding obligations of URSI, enforceable against
URSI in accordance with their respective terms.
6.4 Authorization. The representatives of URSI executing this Agreement
have the corporate authority to enter into and bind URSI to the terms of this
Agreement. URSI has the full legal right, power and authority to enter into this
Agreement and the Merger.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
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(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of URSI;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which URSI is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of URSI's properties pursuant to (A) any law or regulation to
which URSI or any of its property is subject, or (B) any judgment, order or
decree to which URSI is bound or any of its property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of URSI.
6.6 Capitalization of URSI and Ownership of URSI STOCK. The authorized and
outstanding capital stock of URSI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of URSI are owned beneficially and of record by
the persons set forth on Annex III. All issued and outstanding shares of URSI
stock are duly authorized, validly issued, fully paid and nonassessable. There
are no obligations of URSI to repurchase, redeem or otherwise acquire any shares
of URSI stock. Except as described in the Registration Statement and except with
respect to a contemplated stock split prior to the filing of the Registration
Statement, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which URSI or any of its
subsidiaries are a party or by which they are bound obligating URSI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of URSI or any of its subsidiaries or
obligating URSI or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of URSI, as of the Closing Date, none
of the STOCKHOLDERS set forth on Annex III will be a party to or subject to any
voting trust, proxy or other agreement or understanding with respect to the
shares of capital stock of URSI owned by such STOCKHOLDER. All of the shares of
URSI Stock to be issued to the STOCKHOLDERS in accordance herewith will be duly
authorized, validly issued, fully paid and nonassessable. All of the shares of
URSI Stock issued to persons set forth on Annex III and, based on the
representations of STOCKHOLDERS contained in this Agreement and in the documents
delivered to URSI pursuant hereto, to STOCKHOLDERS pursuant to this Agreement,
were or will be offered, issued, sold and delivered by URSI in compliance with
all applicable state and federal laws concerning the issuance of securities and
none of such shares were or will be issued in violation of the preemptive rights
of any past or present stockholder. On the Closing Date the capitalization of
URSI will be as set forth in the Registration Statement.
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6.7 No Side Agreements. URSI has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
other than the Other Agreements and the agreements contemplated by each of the
Other Agreements, including the employment agreements referred to therein. URSI
has made available to the COMPANY copies of all agreements entered into between
(i) URSI and its affiliates and (ii) URSI and the Founding Companies or any
stockholders of the Founding Companies. Further, URSI will make available to the
COMPANY copies of any of the foregoing agreements entered into between the date
hereof and the Closing Date promptly after such agreements are entered into.
6.8 Subsidiaries. Except for those companies set forth on Schedule 6.8
(collectively, "URSI's Subsidiaries"), URSI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. URSI is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.9 Business; Real Property; Material Agreements; Financial Information.
URSI has not conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO of URSI Stock
contemplated by Section 8.7. URSI does not own any real property or any material
personal property and is not a party to any other agreement, except as listed on
Schedule 6.9(a) and except that URSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement. URSI was formed in 1997, and has
historical financial statements only for the year ended December 31, 1997.
Attached hereto as Schedule 6.9(b) are URSI's audited historical financial
statements for the year ended December 31, 1997. Such URSI financial statements
have been prepared in accordance with generally accepted accounting principles
and present fairly the financial position of URSI as of the dates indicated
thereon, and such financial statements present fairly the results of their
respective operations for the periods indicated thereon. URSI has no material
liabilities, accrued or contingent, other than those incurred in connection with
this Agreement, the Other Agreements and the contemplated IPO of URSI Stock.
6.10 Conformity with Law. URSI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a URSI Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of URSI, threatened, against or affecting URSI, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau,
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agency or instrumentality having jurisdiction over either of them and no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received. URSI (including URSI's Subsidiaries) has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing which would have a URSI Material Adverse
Effect.
6.11 No Violations. A certified copy of the Certificate of Incorporation
and a true, complete and correct copy of the Bylaws of URSI, both as amended to
date, (the "URSI Charter Documents"), have been or will be delivered to the
COMPANY. URSI is not (i) in violation of any URSI Charter Document or (ii) in
default under any material lease, instrument, agreement, license, permit to
which it is a party or by which its properties are bound (the "URSI Material
Documents"); and, except as set forth in the schedules and documents listed in
the Registration Statement, (a) the rights and benefits of URSI (including
URSI's Subsidiaries) under the URSI Material Documents will not be materially
and adversely affected by the transactions contemplated hereby and (b) the
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the URSI Material Documents or the URSI Charter Documents. Except
as set forth on Schedule 6.11, none of the URSI Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of URSI and each of URSI's
subsidiaries as heretofore made available to the COMPANY are true and correct.
6.12 Taxes.
(i) URSI has no plan or intention for either it or any affiliated
party to purchase or reacquire any of the URSI stock issued in connection with
the Merger.
(ii) URSI and, to the knowledge of URSI, the STOCKHOLDERS will each
pay their respective expenses, if any, incurred in connection with the Merger in
accordance with Section 18.6 hereof.
(iii) There is no intercorporate indebtedness existing between URSI
and the COMPANY that was issued, acquired, or will be settled at a discount.
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(iv) URSI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) URSI intends after the Closing Date to continue the historic
business of the COMPANY or to use a significant portion of the COMPANY's
historic business assets in a business.
(vi) URSI has no plan or intention to sell or otherwise dispose of
any of the assets of the COMPANY (including the stock or assets of any Acquired
Party) acquired in the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code.
(vii) None of the compensation received by any STOCKHOLDER-employees
of the COMPANY after the Merger will be separate consideration for, or allocable
to, any of their shares of the COMPANY; none of the shares of URSI Stock
received by any STOCKHOLDER-employees in the Merger will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any STOCKHOLDER-employees after the Merger pursuant to
arrangements entered into after the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(viii) The proposed Merger is being undertaken for reasons germane
to the business of URSI.
7. COVENANTS PRIOR TO CLOSING.
7.1 Access and Cooperation; Due Diligence.
(i) Between the date of this Agreement and the Closing Date, the
COMPANY will afford to the officers and authorized representatives of URSI and
the Founding Companies other than the COMPANY access to all of the COMPANY's
(including the COMPANY's Subsidiaries) key employees, sites, properties, books
and records and will furnish URSI with such additional financial and operating
data and other information as to the business and properties of the COMPANY
(including the COMPANY's Subsidiaries) as URSI or the Founding Companies other
than the COMPANY may from time to time reasonably request. The COMPANY will
cooperate with URSI and the Founding Companies other than the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. URSI, the STOCKHOLDERS and the COMPANY
will treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to
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the Founding Companies other than the COMPANY as confidential in accordance with
the provisions of Section 14 hereof. In addition, URSI will cause each of the
Founding Companies other than the COMPANY to enter into a provision similar to
this Section 7.1 requiring each such Founding Company to keep confidential any
information obtained by such Founding Company.
(ii) Between the date of this Agreement and the Closing Date, URSI
will afford to the officers and authorized representatives of the COMPANY access
to all of URSI's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of URSI as the COMPANY may from time to time
reasonably request. URSI will cooperate with the COMPANY, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information obtained in
connection with the negotiation and performance of this Agreement to be treated
as confidential in accordance with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the COMPANY's
subsidiaries to, except as set forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements to
which it is a party relating to or affecting its respective assets, properties
or rights;
(iv) subject to Section 7.6, keep in full force and effect present
insurance policies or other comparable insurance coverage;
(v) use best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with it;
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(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or lease instruments over
$2,500, without the knowledge and consent of URSI (which consent shall not be
unreasonably withheld).
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Closing Date, the COMPANY has not and,
without the prior written consent of URSI, will not:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to incur any liability or
make any capital expenditures, except if (x) it is in the normal course of
business (consistent with past practice) or (y) when aggregated with all other
such contracts, commitments, liabilities and capital expenditures not in the
normal course of business consistent with past practice, it involves an amount
not in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except (x) bonuses to employees
(other than the STOCKHOLDERS or their affiliates) consistent with past practice
and (y) increases in salaries and commissions payable to employees (other than
to STOCKHOLDERS and their affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level higher than one
hundred ten percent (110%) of such employee's current salary or bonus, whichever
is applicable;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in
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excess of $10,000 necessary or desirable for the conduct of the businesses of
the COMPANY (including the COMPANY's Subsidiaries), or (2) liens set forth on
Schedule 5.15 hereto or (3) liens for taxes either not yet due or materialmen's,
mechanics', workers', repairmen's, employees' or other like liens arising in the
ordinary course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in Schedule
5.11 unless specifically listed thereon;
(xi) commit a material breach or amend or terminate any Material
Contract, or material permit, license or other right of the COMPANY, or make or
terminate any election involving Taxes which would in any way adversely affect
the Tax liability of the Company or any Acquired Party (or URSI following the
Merger) in any taxable period; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative of any of
the foregoing will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than URSI or the
Founding Companies relating to, any acquisition or purchase of all or a
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material amount of the assets of, or any equity interest in, the COMPANY or a
merger, consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pricing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide URSI with proof that any required notice has been sent.
7.6 Termination of Plans. Prior to the Pricing Date, the COMPANY shall
terminate all Plans listed in Schedule 7.6.
7.7 URSI Prohibited Activities. Between the date of this Agreement and the
Closing Date, except as set forth on Schedule 7.7, URSI will not:
(i) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(ii) make any changes in its Certificate of Incorporation or Bylaws
other than one or more amendments to the Certificate of Incorporation to
accomplish a split or reverse split of the URSI Stock (provided that in the
event of any such split or reverse split, the number of shares of URSI Stock to
be delivered to the STOCKHOLDERS, and to the stockholders of the Other
Companies, as set forth on Annex I, will be adjusted accordingly);
(iii) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures that would be material to
URSI and the URSI Subsidiaries;
(iv) hire or appoint any officer or director or increase the
compensation payable or to become payable to any officer or director; and
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to URSI and the URSI Subsidiaries.
7.8 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to URSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect on or prior to the Closing
Date and (ii) any material failure of any
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STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder, provided no
such notice shall be required until the Pricing Date with respect to the
occurrence in the ordinary course of business of any event which would cause
Schedules 5.10, 5.11 or 5.14 to be incorrect. URSI shall give prompt notice to
the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty of URSI contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing Date and (ii) any material failure of URSI to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.9, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.9 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11 and 5.14 shall only have to be delivered at the Pre-Closing, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. In the event that the COMPANY amends or supplements
a Schedule pursuant to this Section 7.9, and URSI and a majority of the Founding
Companies do not consent to the effectiveness of such amendment or supplement at
or before the Pre-Closing, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. In the event that URSI amends or
supplements a Schedule pursuant to this Section 7.9 and COMPANY and a majority
of the Founding Companies do not consent to the effectiveness of such amendment
or supplement at or before the Pre-Closing, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.9. In the event that one of the other
Founding Companies amends or supplements a Schedule pursuant to Section 7.9 of
one of the Other Agreements, URSI shall give the COMPANY notice promptly after
it has knowledge thereof. If URSI, COMPANY and a majority of the Founding
Companies do not consent to the effectiveness of such amendment or supplement at
or before the Pre-Closing,
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this Agreement shall be deemed terminated by mutual consent as set forth in
Section 12.1(i) hereof. For purposes of this Section 7.9, URSI shall be deemed
to have given its consent to the effectiveness of any amendment or supplement to
a Schedule if URSI does not notify COMPANY of its disapproval within 48 hours
after URSI is notified of such amendment or supplement, and COMPANY and each
other Founding Company shall be deemed to have given its consent to the
effectiveness of any amendment or supplement to a Schedule if COMPANY or such
other Founding Company, as applicable, does not notify URSI of its disapproval
within 48 hours after COMPANY or such other Founding Company, as applicable, is
notified of such amendment or supplement. Except as otherwise provided herein,
no amendment of or supplement to a Schedule shall be made after the Pre-Closing.
7.10 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to URSI and the Underwriters
all of the information concerning the COMPANY or the STOCKHOLDERS reasonably
requested by URSI and the Underwriters, and will cooperate with URSI and the
Underwriters in the preparation of the Registration Statement and the prospectus
included therein (including audited financial statements prepared in accordance
with generally accepted accounting principles). The COMPANY and the STOCKHOLDERS
agree promptly to advise URSI if at any time during the period in which a
prospectus relating to the offering is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy.
7.11 Examination of Final Financial Statements. To the extent that
financial statements of the COMPANY for any quarter subsequent to December 31,
1997 are required to be included in the Registration Statement, the COMPANY
shall provide, and URSI shall have had sufficient time to review, the unaudited
balance sheet and statements of income, cash flows and retained earnings of the
COMPANY as of the end of such quarter, disclosing no Material Adverse Change in
the financial condition or results of operations of the COMPANY. Such financial
statements, which shall be deemed to be Financial Statements (as described in
Section 5.9), shall have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted therein). To the extent such Financial Statements
shall be included or reflected in the Registration Statement, any events or
circumstances reflected therein which might constitute a Material Adverse Effect
with respect to the COMPANY shall be deemed to have been waived by URSI and URSI
shall have no rights in respect of such Material Adverse Effect.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.
The obligations of STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pricing Date are subject to the satisfaction or
waiver on or prior to the Pricing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.1 and 8.11.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of URSI contained in Section 6 shall be true and
correct in all material respects as of the Pricing Date and the Closing Date as
though such representations and warranties had been made as of that date; each
and all of the terms, covenants and conditions of this Agreement to be complied
with and performed by URSI on or before the Pricing Date and the Closing Date
shall have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Pricing Date and the Closing Date
and signed by the President or any Vice President of URSI shall have been
delivered to the STOCKHOLDERS.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) URSI shall
have made available to the COMPANY copies of each draft (or changed pages of
such draft) of the Registration Statement produced prior to the initial filing
with the Securities and Exchange Commission (the "SEC") the effectiveness
thereof and the filing with the SEC of any amendment or supplement thereto after
the effectiveness thereof (including any prospectus filed pursuant to Rule 424
under the 1933 Act) and (ii) the COMPANY or STOCKHOLDERS shall have failed to
inform URSI in writing prior to the filing or the effectiveness thereof, as the
case may be, of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact, provided however, that for the
period commencing 72 hours prior to any such filing or effectiveness, URSI can
make such draft or changed pages available by facsimile.
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8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 Stockholders' Release. Each stockholder of URSI immediately prior to
the Pricing Date who is an officer or director of URSI shall have delivered to
the COMPANY an instrument dated the Pricing Date releasing URSI from any and all
claims of such stockholders against URSI and obligations of URSI to such
stockholders other than obligations arising in connection with this Agreement,
obligations to Ross Berner and Mark McKinney for loans made to the COMPANY which
are disclosed in the Registration Statement, the Other Agreements, any
employment agreements between such stockholders and URSI, any options to
purchase URSI Stock granted by URSI to such stockholder and any right to the
issuance of the shares of URSI Stock set forth in Annex III hereto.
8.5 Opinion of Counsel. The COMPANY shall have received an opinion from
counsel for URSI, dated the Closing Date, in the form annexed hereto as Annex V.
8.6 Director Indemnification. URSI shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
amount as is customary for companies similarly situated and URSI shall have
entered into an indemnification agreement with each STOCKHOLDER, if any, who
will become a director of URSI substantially in the form attached as Annex VII.
8.7 Registration Statement. URSI shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of URSI
Stock having a value (the "Offered Value") of at least $40,000,000. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire on a firm commitment
basis such shares of URSI Stock, subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), on terms such that the
aggregate value of the cash and of the number of shares of URSI Stock (valued at
the IPO initial public offering price) to be received by the STOCKHOLDERS as
shown on Annex I is not less than the Minimum Value set forth on Annex I.
8.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
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transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Merger and no governmental agency or body shall have taken any other action
or made any request of COMPANY as a result of which COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.9 Good Standing Certificates. URSI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pricing
Date, duly issued by the Delaware Secretary of State and in each state in which
URSI is authorized to do business, showing that URSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for URSI, for all periods prior to the Pre-Closing have been filed and
paid.
8.10 No Waivers. URSI shall not have waived any closing condition under
any Other Agreement, unless such condition does not constitute a Material
Adverse Effect (as defined in such Other Agreement) on the Founding Company
party to such Other Agreement.
8.11 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a URSI Material Adverse Effect; and the COMPANY
shall have received a certificate signed by URSI dated the Pricing Date and the
Closing Date.
8.12 Transfer Restrictions. Each stockholder named on Annex III who is an
officer or director of URSI shall have entered into an agreement with URSI
pursuant to which such stockholder agrees to restrictions on such stockholder's
ability to transfer securities similar to the restrictions imposed on the
STOCKHOLDERS pursuant to Section 15 hereof.
8.13 Employment Agreements, Consulting Agreements, Leases and Cosale
Agreement. URSI shall have entered the Employment Agreements, Consulting
Agreements and Leases (all as defined in Section 9.12); and Ed Sheehan, Mark
McKinney and Ross Berner shall have entered into a cosale agreement for the
benefit of the Stockholders and the stockholders of Other Companies in the form
attached as Annex XI.
8.14 Tax Opinion. The STOCKHOLDERS shall have received an opinion dated
the Closing Date of Fabian & Clendenin to the effect that the Merger qualifies
as a reorganization as defined in Section 368(a)(i)(A) of the Code. The
STOCKHOLDERS shall provide such certificates as may be reasonably required by
such firm in rendering such opinion.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF URSI.
The obligations of URSI with respect to actions to be taken on the
Pricing Date are subject to the satisfaction or waiver on or prior to the
Pricing Date of all of the following conditions. The obligations of URSI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.1 and 9.4.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Pricing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each and
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Pricing Date
or the Closing Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to URSI a certificate dated the Pricing Date and the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the offering and sale by URSI of URSI Stock pursuant
to the Registration Statement and no governmental agency or body shall have
taken any other action or made any request of URSI as a result of which the
management of URSI deems it inadvisable to proceed with the transactions
hereunder.
9.3 Examination of Final Financial Statements. Prior to the Closing Date,
URSI shall have had sufficient time to review the unaudited consolidated balance
sheets of the COMPANY for the fiscal quarters beginning after the Balance Sheet
Date, and the unaudited consolidated statement of income, cash flows and
retained earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no material adverse change in the financial
condition of the COMPANY or the results of its operations from the financial
statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and URSI shall have
received a certificate signed by the STOCKHOLDERS dated the Pricing Date to such
effect.
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9.5 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to URSI
immediately prior to the Pricing Date an instrument dated the Pricing Date
releasing the COMPANY from any and all claims of the STOCKHOLDERS against the
COMPANY and obligations of the COMPANY to the STOCKHOLDERS, except for items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS and continuing obligations to STOCKHOLDERS
relating to their employment by the Surviving Corporation.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to URSI.
9.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or STOCKHOLDERS, other than those set forth on Schedule 9.7 shall
have been cancelled.
9.8 Opinion of Counsel. URSI shall have received an opinion from Hale,
Lane, Peek, Dennison, Howard, Anderson and Pearl, counsel to the COMPANY and the
STOCKHOLDERS, dated the Pricing Date, in the form annexed hereto as Annex VI,
and the Underwriters shall have received a copy of the same opinion addressed to
them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; the COMPANY
shall have obtained and delivered to URSI such additional consents to the Merger
as URSI may reasonably request including, without limitation, URSI's receipt on
or prior to the Pricing Date of those licenses, franchises, permits or
governmental authorizations set forth on Schedule 5.12 pursuant to the last
sentence of Section 5.12, or assurances reasonably acceptable to it that such
licenses, franchises, permits or governmental authorizations will be received on
the Closing Date or that the failure to receive such licenses, franchises,
permits or governmental authorizations on the Closing Date will not adversely
affect its ability to conduct the business of the Company as conducted prior to
the Closing Date; and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of URSI as a result of
which URSI deems it inadvisable to proceed with the transactions hereunder.
9.10 Good Standing Certificates. The COMPANY shall have delivered to URSI
a certificate, dated as of a date no later than ten days prior to the Pricing
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Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by URSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes due by the COMPANY for all periods prior to the Pre-Closing
have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 9.12(a) shall have entered into an employment
agreement with URSI substantially in the form of Annex VIII A or Annex VIII B,
whichever is indicated on Schedule 9.12(a) (each an "Employment Agreement"),
each of the STOCKHOLDERS listed on Schedule 9.12(b) shall have entered into a
consulting agreement with URSI substantially in the form of Annex IX (each a
"Consulting Agreement"), and each of the STOCKHOLDERS listed on Schedule 9.12(c)
shall have entered into leases with URSI substantially in the form attached as
Annex X (collectively the "Leases").
9.13 Repayment of Indebtedness. Prior to the Pricing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the Company's
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY's Subsidiaries).
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to URSI a
certificate to the effect that such STOCKHOLDER is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. URSI shall be named as an additional named insured on, or
alternatively the insurer shall have been notified of the Merger and shall have
confirmed in writing that the Surviving Corporation will be an insured under,
each of the COMPANY's insurance policies.
10. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
10.1 Preservation of Tax and Accounting Treatment. After the Closing Date,
none of the parties shall knowingly undertake any act, or knowingly permit any
subsidiary or affiliate to undertake any act, that would jeopardize the status
of the Merger as a reorganization described in Section 368(a)(1)(A) of the Code.
Such acts shall include, but not be limited to, the following:
(i) for a period of two years following the Closing Date, the
retirement or reacquisition, directly or indirectly, by URSI of all or part of
the
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URSI Stock issued in connection with the transactions contemplated hereby
pursuant to a plan considered or adopted by URSI on or before the Closing Date;
(ii) the provision of any financial and/or economic benefits by URSI
to the STOCKHOLDERS in their capacity as such, except as expressly provided in
this Agreement;
(iii) the disposition of any material part of the assets of the
COMPANY within two years following the Closing Date except (x) in the ordinary
course of business, (y) to eliminate duplicate services or excess capacity or
(z) to address financial matters or performance issues which were not reasonably
expected to occur as of the Closing Date;
(iv) in the absence of compelling financial concerns not otherwise
present on the Closing Date or other changed circumstances not otherwise
anticipated on the Closing Date, the discontinuance of the historic business of
the COMPANY; or
(v) for a period of one year following the Closing Date, in the
absence of materially changed circumstances not anticipated on the Closing Date,
the disposition by the STOCKHOLDERS of a material amount of URSI Stock issued in
connection with the Merger.
10.2 Disclosure. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus of URSI utilized in connection with
the IPO, the COMPANY or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement or would affect any document delivered pursuant hereto in any material
respect, the COMPANY and the STOCKHOLDERS shall promptly give notice of such
fact or circumstance to URSI.
10.3 Cooperation in Tax Return Preparation. Each party hereto shall at
their own expense cooperate with each other and make available to each other
such Tax data and other information as may be reasonably required in connection
with (i) the preparation or filing of any Tax Return, election, consent or
certification, or any claim for refund, (ii) any determinations of liability for
Taxes, or (iii) an audit, examination or other proceeding with respect to Taxes
("Tax Data"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors reasonably available on a mutually
convenient basis for all reasonable purposes, including, without limitation, to
provide explanations and background information and to permit the copying of
books, records, schedules, workpapers, notices, revenue agent reports,
settlement or closing
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agreements and other documents containing the Tax Data ("Tax Documentation").
The Tax Data and the Tax Documentation shall be retained until one year after
the expiration of all applicable statutes of limitations (including extensions
thereof); provided, however, that in the event an audit, examination,
investigation or other proceeding has been instituted prior to the expiration of
an applicable statute of limitations, the Tax Data and Tax Documentation
relating thereto shall be retained until there is a final determination thereof
(and the time for any appeal has expired).
10.4 Tax Return Preparation and Filing.
(i) URSI will be responsible for preparing and filing (or causing
the preparation and filing of) all income Tax Returns with respect to URSI or
any Acquired Party for any taxable period beginning on or after the Closing
Date. The parties hereto acknowledge that the Closing Date shall be the last day
of a taxable period of the Company pursuant to Code Section 381 and the
regulations promulgated thereunder.
(ii) STOCKHOLDERS will be responsible for preparing and filing (or
causing the preparation and filing of) all income Tax Returns with respect to
the COMPANY and any Acquired Party for any taxable period ending on or before
the Closing Date. URSI and the STOCKHOLDERS shall (a) with respect to such
income Tax Returns, determine the income, gain, expenses, losses, deductions,
and credits of the COMPANY and any Acquired Party in a manner consistent with
prior practice and in a manner that apportions such income, gain, expenses,
loss, deductions and credits equitably from period to period and (b) prepare
such Tax Returns in a manner consistent with prior years, in each case as
determined in the good faith judgment of the preparer of such returns; provided,
however, that in all events such Tax Returns shall be prepared in a manner
consistent with applicable laws.
(iii) In order appropriately to apportion any Taxes relating to a
taxable period that includes (but that would not, but for this section, close
on) the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable period of the Company and
any Acquired Party, and such taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit the Company or an Acquired Party to treat the Closing Date as the last
day of a taxable period, then for purposes of this Agreement, the portion of
each such Tax that is attributable to the operations of the Company or an
Acquired Party for such Interim Period shall be (i) in the case of a Tax that is
not based on income or gross receipts, the total amount of such Tax for the
period in question multiplied by a fraction, the numerator of which is the
number of days in the Interim Period, and the denominator of which is the
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total number of days in such period, and (ii) in the case of a Tax that is based
on income or gross receipts, the Tax that would be due with respect to the
Interim Period, if such Interim Period constituted an entire taxable period.
10.5 Reorganization Status Information Reporting. Each of the parties
agrees to file whatever information returns may be required to treat the merger
of URSI and the COMPANY pursuant to this Agreement as a reorganization described
in Section 368(a)(1)(A) of the Code, and, in particular, to comply with the tax
reporting requirements of Section 1.368-3 of the Treasury Regulations.
10.6 Special Definitions Related to Tax Matters. For all purposes of this
Agreement related to any Tax matters (including Sections 5.22 and 6.12):
(a) "Affiliate" of a person or entity shall mean a person or entity
that directly or indirectly controls, is controlled by or is under common
control with that person or entity.
(b) "Interim Period" shall mean any taxable period commencing prior
to the Closing Date and ending after the Closing Date.
(c) "Pre-Closing Period" shall mean (i) any taxable period that
begins before the Closing Date and ends on or before the Closing Date and (ii)
the portion of any Interim Period through and including the Closing Date.
(d) "Post-Closing Period" means any taxable period that begins after
the Closing Date, and, with respect to any Interim Period, the portion of such
Interim Period commencing on the Closing Date.
(e) "Tax" means any federal, state, local, or foreign income, gross
receipts, ad valorem, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A), customs duties, capital stock, net worth, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
workers compensation, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever imposed by any federal, state, local or foreign government
or any agency or political subdivision of any such government, including any
interest, penalty, or addition thereto, without regard to whether such tax is
disputed or not or arose before, on or after the Closing Date.
(f) "Tax Returns" means all reports, elections, declarations, claims
for refund, estimates, information statements and returns (including any
schedules and attachments thereto) relating to, or required to be filed in
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connection with, any Taxes pursuant to the statutes, rules and regulations of
any federal, state, local or foreign government taxing authority.
(g) "Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction, having or purporting to have jurisdiction with respect to any Tax.
10.7 Directors. The persons named in the Registration Statement shall be
appointed as directors of URSI on or before the Closing Date.
10.8 Release from Guarantees. URSI shall use its best efforts to have the
STOCKHOLDERS released from any and all guarantees on any obligations of the
COMPANY that they personally guaranteed for the benefit of the COMPANY
(including the COMPANY's Subsidiaries), with all such guarantees on indebtedness
being assumed by URSI. URSI agrees to indemnify the STOCKHOLDERS against any and
all claims made by lenders under such guarantee which arise as a result of
URSI's failure to cause such guarantee to be released on or prior to the
Closing.
10.9 Preservation of Plans. For a period of five (5) years following the
Closing Date, URSI will use its best efforts to maintain in full force and
effect each Plan listed in Schedule 10.9, and if any such Plan is a Qualified
Plan, will continue to make contributions to such Plan at or above the level
stated in Schedule 10.9, unless and until (i) in the case of any Qualified Plan
listed in Schedule 10.9, URSI establishes a defined contribution plan intended
to qualify under Section 401(a) of the Code and makes contributions to such plan
at or above the level stated in Schedule 10.9, or (ii) in the case of each other
Plan, URSI establishes a replacement Plan providing equivalent or better
benefits, provided that if the cost of providing equivalent benefits should, in
the good faith judgment of URSI, become commercially unreasonable, the
replacement plan established by URSI may have benefits that are, in the good
faith judgment of URSI, as close to equivalent as can be obtained at
commercially reasonable cost. There are no intended third party beneficiaries of
this Section 10.9, and after the Closing Date it can be waived or modified by
URSI and STOCKHOLDERS (or their successors) shown as owning two-thirds of
COMPANY Stock on Annex II.
11. INDEMNIFICATION.
The STOCKHOLDERS and URSI each make the following covenants that are
applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except
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with respect to Sections 5.30 through 5.32, which shall be several), will
indemnify, defend, protect and hold harmless URSI, the COMPANY and the Surviving
Corporation at all times from and after the date of this Agreement until the
Expiration Date as defined in Section 5 above, from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by URSI, the COMPANY or
the Surviving Corporation as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or the COMPANY set forth
herein or on the schedules or certificates delivered in connection herewith
(other than the representations and warranties provided in Section 5.22, for
which Section 11.6 provides special indemnity provisions); (ii) any
nonfulfillment of any agreement on the part of the STOCKHOLDERS or the COMPANY
under this Agreement; or (iii) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, (x)
arising out of or based upon any untrue statement of a material fact relating to
the COMPANY (including the COMPANY's Subsidiaries) or the STOCKHOLDERS that is
provided to URSI or its counsel by the COMPANY or the STOCKHOLDERS and contained
in any preliminary prospectus relating to the IPO, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or (y) arising out of or based upon any omission to state therein a
material fact relating to the COMPANY (including the COMPANY's Subsidiaries) or
the STOCKHOLDERS that is required to be stated therein or necessary to make the
statements therein not misleading, and not provided to URSI or its counsel by
the COMPANY or the STOCKHOLDERS, provided, however, that such indemnity shall
not inure to the benefit of URSI, the COMPANY or the Surviving Corporation to
the extent that such untrue statement (or alleged untrue statement) was made in,
or omission (or alleged omission) occurred in, any preliminary prospectus and
the STOCKHOLDERS provided, in writing, corrected information to URSI counsel and
to URSI for inclusion in the final prospectus, and such information was not so
included.
11.2 Indemnification by URSI. URSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY and the STOCKHOLDERS as a result of or arising from (i)
any breach by URSI of its representations and warranties set forth herein or on
the schedules or certificates attached hereto; (ii) any nonfulfillment of any
agreement on the part of URSI under this Agreement; (iii) any liabilities which
the COMPANY or the STOCKHOLDERS may incur due to URSI's failure to be
responsible for
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the liabilities and obligations of the COMPANY as provided in Section 1 hereof
(except to the extent that URSI has claims against the STOCKHOLDERS by reason of
such liabilities); or (iv) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to URSI or any of the Founding Companies other than the
COMPANY contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to URSI or any of the Founding Companies
other than the COMPANY that is required to be stated therein or necessary to
make the statements therein not misleading.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if such
counsel shall have a conflict of interest that prevents such counsel from
representing Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing and Indemnifying
Party will reimburse the Indemnified Party for the expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or
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settlement of such asserted liability, except to the extent such participation
is requested by the Indemnifying Party, in which event the Indemnified Party
shall be reimbursed by the Indemnifying Party for reasonable additional legal
expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept
a final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person claim
shall be limited to the amount so offered in settlement by said Third Person and
the Indemnified Party shall reimburse the Indemnifying Party for any additional
costs of defense which it subsequently incurs with respect to such claim and all
additional costs of settlement or judgment. If the Indemnifying Party does not
undertake to defend such matter as to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. All settlements hereunder
shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for any Tax benefits, Tax detriments or insurance proceeds in
determining the amount of any indemnification obligation under this Section,
provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy. All indemnification payments
under this Section shall be deemed adjustments to the Merger consideration
provided for herein.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
(i) The first amounts otherwise payable by one or more STOCKHOLDERS
(whether jointly and severally or severally) pursuant to Sections 11.1 and 11.3
to URSI, the COMPANY and the Surviving Corporation will be offset and reduced
(but not below zero) by the Indemnification Threshold. The "Indemnification
Threshold" is an amount equal to two
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percent (2%) of the aggregate value of the consideration paid to the
STOCKHOLDERS on the Closing Date pursuant to Section 2.2 of this Agreement
unless this Agreement is terminated prior to the Closing Date, in which event
the Indemnification Threshold is an amount equal to two percent (2%) of the
Minimum Value set forth in Annex I. All such amounts otherwise payable by one or
more STOCKHOLDERS in excess of the amount so offset and reduced shall be paid
without offset or reduction pursuant to this Section 11.5(i). This Section
11.5(i) shall not apply to amounts payable pursuant to Section 11.6. For
purposes of determining the Indemnification Threshold, the URSI Stock shall be
valued at the initial price of the URSI Stock sold to the public in the IPO.
(ii) The first amounts otherwise payable by URSI pursuant to
Sections 11.2 and 11.3 to STOCKHOLDERS and the COMPANY will be offset and
reduced (but not below zero) by an amount equal to the Indemnification
Threshold. All such amounts otherwise payable by URSI in excess of the amount so
offset and reduced shall be paid without offset or reduction pursuant to this
Section 11.5(ii). This Section 11.5(ii) shall not apply to amounts payable
pursuant to Section 11.6.
(iii) If this Agreement is terminated prior to the Closing Date, in
no event shall any STOCKHOLDER be liable under this Agreement, including this
Section 11, to pay more than one-half the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock, with respect to Specially Limited Claims. If this Agreement is
not terminated prior to the Closing Date, in no event shall any STOCKHOLDER be
liable under this Agreement, including this Section 11, to pay more than
one-half the amount of the proceeds received by such STOCKHOLDER pursuant to
this Agreement, calculated as provided in Section 11.5(iv), with respect to
Specially Limited Claims. Specially Limited Claims are all claims that may be
made pursuant to this Agreement, including this Section 11, except claims based
on (a) breach of representations and warranties in Section 5.13, (b) breach of
representations and warranties in Section 5.19 or Section 5.20 or (c) Section
11.6.
(iv) If this Agreement is terminated prior to the Closing Date, then
notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the Minimum Value set forth in Annex I,
multiplied by such STOCKHOLDER's percentage ownership of issued and outstanding
COMPANY Stock. If this Agreement is not terminated prior to the Closing Date,
then notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Agreement, including this Section 11, for
amounts which in the aggregate exceed the amount of proceeds received by such
STOCKHOLDER pursuant to this Agreement. The
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amount of proceeds received by each STOCKHOLDER shall be calculated (for
purposes of Section 11.5(iii) and this Section 11.5(iv)) by adding (a) the cash
proceeds paid to such STOCKHOLDER pursuant to Section 2.2 hereof prior to the
date that the indemnity obligation of such STOCKHOLDER is paid, plus (b) the net
proceeds to such STOCKHOLDER from the sale of such STOCKHOLDER's URSI Stock
received pursuant to Section 2.2 hereof prior to the date that the indemnity
obligation of such STOCKHOLDER is paid, plus (c) the Fair Market Value (as
defined in Annex I) of the unsold shares of URSI Stock received by such
STOCKHOLDER pursuant to Section 2.2 prior to the date that the indemnity
obligation of such STOCKHOLDER is paid, valued on the trading day prior to the
day the indemnification obligation is paid.
(v) In the event that any STOCKHOLDER has requested registration of
any shares of URSI Stock pursuant to the last paragraph of Section 17.2, the
amount of any indemnification obligation that is to be paid from the proceeds of
the sale of such shares of URSI Stock shall not be payable until ten (10) days
after such shares may be sold pursuant to such registration statement.
(vi) Notwithstanding any other provision of this Agreement, no
STOCKHOLDER shall have any obligation to indemnify URSI or its successors with
respect to a breach of a representation made in Section 5.9 to the extent that
such breach arises by reason of KPMG Peat Marwick, having first been provided by
COMPANY or such STOCKHOLDER with all necessary and relevant information relating
to an item to be set forth on the Financial Statements, not including or
properly presenting such item on the Financial Statements in accordance with
generally accepted accounting principles consistently applied, provided,
however, that the limitation on liability set forth above shall not limit the
liability of any STOCKHOLDER to URSI with respect to any item if such
STOCKHOLDER prior to the Closing Date has actual knowledge (including, if
applicable, an actual knowledge of the generally accepted accounting principles
relevant to an item) of a failure by KPMG Peat Marwick LLP to so include or
properly present an item and did not prior to the Closing Date inform URSI of
any such item as to which such STOCKHOLDER has such actual knowledge. The
provisions and limitations of this section shall have no relevance to, and shall
not be applied against or otherwise serve to reduce, any basket or cap provided
for in this Agreement.
11.6 Special Tax Indemnity Provisions
(i) From and after the Closing Date, the STOCKHOLDERS, jointly and
severally, shall indemnify and save URSI, the COMPANY and any Acquired Party
harmless from, and shall be entitled to any refund of, any and all Taxes
(including without limitation any obligation to contribute to the payment of, or
be entitled to share in the refund of, a Tax determined on a
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consolidated, combined or unitary basis with respect to a group of corporations
that includes or included the COMPANY or any Acquired Party) which are (i)
imposed on any member (other than the COMPANY or any Acquired Party) of the
consolidated, unitary or combined group which includes or included the COMPANY
or any Acquired Party or (ii) imposed on the COMPANY or any Acquired Party in
respect of its income, business, property or operations or for which the COMPANY
or any Acquired Party may otherwise be liable (A) for any Pre-Closing Period,
(B) resulting by reason of the several liability of the COMPANY or any Acquired
Party pursuant to Treasury Regulations section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of the COMPANY or any Acquired
Party having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date, (C) resulting from the COMPANY or any Acquired Party
ceasing to be a member of any affiliated group (within the meaning of Section
1504(a) of the Code), (D) in respect of any Post-Closing Period, attributable to
events, transactions, sales, deposits, services or rentals occurring, received
or performed in a Pre-Closing Period, (E) in respect of any Post-Closing Period,
attributable to any change in accounting method employed by the COMPANY or any
Acquired Party during any of the four previous taxable years, (F) in respect of
any Post-Closing Period, attributable to any items of income or gain of an
entity treated as a partnership reported by the COMPANY or any Acquired Party as
a partner, to the extent such items are properly attributable to periods of the
"partnership" ending on or before the Closing Date, or (G) attributable to any
discharge of indebtedness that may result from any capital contributions by
STOCKHOLDERS (or an affiliate of STOCKHOLDERS) to the COMPANY or any Acquired
Party of any intercompany indebtedness owed by COMPANY to any STOCKHOLDER (or an
affiliate of any STOCKHOLDER), but, in each case, only to the extent such Taxes
or the entitlement to such refund are not reflected on the applicable Company
Financial Statements as of the Balance Sheet Date.
(ii) From and after the Closing Date, STOCKHOLDERS shall, jointly
and severally, indemnify and save URSI, the COMPANY and any Acquired Party
harmless from (x) any Taxes imposed on URSI, the COMPANY and any Acquired Party
(or any affiliate of URSI, the COMPANY or any Acquired Party) attributable to
any breach of a warranty or representation made by STOCKHOLDERS in Section
5.22(xx), Section 5.22(xxiv) or Section 5.22(xxv) and (y) any liability imposed
on URSI, the COMPANY and any Acquired Party (or any affiliate of such companies)
attributable to any breach of a warranty or representation made by STOCKHOLDERS
in Section 5.22, excluding Section 5.22(xx), Section 5.22(xxiv) and Section
5.22(xxv).
(iii) From and after the Closing Date, and except as expressly
provided otherwise in Section 11.6 (ii) or elsewhere in this Section 11.6, URSI
and the COMPANY shall indemnify and hold harmless STOCKHOLDERS
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from (x) any Taxes imposed on URSI, the COMPANY or any Acquired Party with
respect to any Post-Closing Period and (y) any liability imposed on STOCKHOLDERS
attributable to any breach of a warranty or representation made by URSI in
Section 6.12.
(iv) To the extent any party to this Agreement is entitled to
indemnification from another party under this Section 11.6, such claim for
indemnification shall include the right to recover any losses, damages,
liabilities, expenses and costs related thereto, including, without limitation,
reasonable attorney's and expert witness fees and other costs of investigating
or attempting to avoid the same or oppose the imposition thereof, together with
interest thereon at the prime rate in effect from time to time as determined by
Bank of America N.T. & S.A., compounded quarterly from the date incurred.
(v) Except to the extent expressly provided to the contrary in this
Section 11.6, the general procedures regarding notice and pursuit of
indemnification claims set forth in Sections 11.1 through 11.5 shall apply to
all claims for indemnification made under this Section 11.6. Notwithstanding the
immediately preceding sentence and any provision of Section 11 to the contrary,
if a claim for indemnification involves any matter covered in this Section 11.6,
then the contest provisions of Section 11.7, as applicable, shall control
regarding the defense and handling of any such third-party claim that could give
rise to an indemnification obligation on the part of one party to another. In
addition, and notwithstanding anything else in Article 11 to the contrary, the
party with the right to control a contest has the right to choose counsel of its
choice regarding such contest. Furthermore, there shall be no limit on (i) the
time period during which a claim for indemnification may be made under this
Section 11.6 or (ii) the minimum or maximum amount of indemnity payments that
may be recovered pursuant to this Section 11.6 (other than (x) each party's
obligation to make claims for indemnification promptly and without undue delay
and (y) the aggregate limit for all indemnity payments imposed on a STOCKHOLDER
provided in Section 11.5(iv)).
(vi) All amounts paid pursuant to this Section 11.6 by one party to
another party (other than interest payments) shall be treated by such parties as
an adjustment to the value of the merger consideration provided pursuant to this
Agreement.
11.7 Special Contest Rights Related to Tax Matters.
(i) The STOCKHOLDERS shall have the sole right (but not the
obligation) to control, defend, settle, compromise or prosecute in any manner
any audit, examination, investigation, hearing or other proceeding with respect
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to any Tax Return of the COMPANY or any Acquired Party involving only
Pre-Closing Periods.
(ii) Except as expressly provided to the contrary in this Section
11.7, URSI shall have the sole right (but not the obligation) to control,
defend, settle, compromise, or prosecute in any manner an audit, examination,
investigation, hearing or other proceeding with respect to any Tax Return of the
COMPANY or any Acquired Party; provided, however, that any liability for Taxes
or Tax issues related to an Interim Period may not be settled or compromised
without the consent of the STOCKHOLDERS, which consent shall not be unreasonably
withheld or delayed. In addition, (i) URSI shall keep the STOCKHOLDERS duly
informed of any proceedings in connection with an Interim Period and (ii) the
STOCKHOLDERS shall be entitled to receive copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
11.8 Special Notification Requirements Regarding Tax Disputes. URSI and
the COMPANY (including any Acquired Party) shall promptly forward to the
STOCKHOLDERS all written notifications and other written communications from any
Tax Authority received by URSI or the COMPANY (including any Acquired Party)
relating solely to any Pre-Closing Period of the COMPANY (including any Acquired
Party), and URSI and the COMPANY (including any Acquired Party) shall execute or
cause to be executed any power of attorney or other document or take such
actions as requested by the STOCKHOLDERS to enable the STOCKHOLDERS to take any
action STOCKHOLDERS deem appropriate with respect to any proceedings relating
thereto.
11.9 Refunds. A party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another party shall
immediately pay an amount equal to such refund, credit, offset or benefit
(including any interest thereon) to the party that effectively paid the Tax with
respect to which the refund, credit, offset or benefit relates. A party entitled
to a deduction on account of a Tax effectively paid by another party shall pay
an amount equal to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which such
deduction relates, such amount to be paid immediately after such saving is
realized.
11.10 Optional Payment With Shares. Subject to Section 10.1, any
STOCKHOLDER may make any payment to URSI required by this Section 11 by
tendering shares of URSI Stock obtained by such STOCKHOLDER pursuant to Sections
2 and 3 of this Agreement, with shares so tendered being valued at Fair Market
Value on the trading day prior to the day the
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indemnification obligation is paid. No STOCKHOLDER will be entitled to make
payment with any other shares of URSI Stock.
12. TERMINATION OF AGREEMENT.
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of URSI and the
COMPANY;
(ii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if the Pre-Closing has not been
completed by June 1, 1998, time being of the essence, unless the failure of such
completion is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Pricing Date;
(iii) at or before the Pre-Closing, by the STOCKHOLDERS or COMPANY,
on the one hand, or by URSI, on the other hand, if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and such default shall not have been cured and shall not reasonably be expected
to be cured on or before the Pricing Date;
(iv) at or before the Pre-Closing, pursuant to Section 7.9 hereof;
(v) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Underwriting Agreement is terminated; or
(vi) after the Pre-Closing and before the Closing Date, by the
STOCKHOLDERS or COMPANY, on the one hand, or URSI, on the other hand, if the
Closing Date does not occur within ten (10) days after the Pricing Date, time
being of the essence.
12.2 Liabilities in Event of Termination. In the event of termination of
this Agreement as provided in this Section there shall be no liability or
obligation on the part of any party hereto except to the extent that such
liability is based on the breach by a party of any of its representations,
warranties or covenants set forth in this Agreement, provided however, that
there shall be no liability for a breach of representation or warranty if such
representation or warranty was made in good faith and with no reason to know
such representation or warranty was not true at the time made.
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12.3 Use of Financial Statements. If this Agreement is terminated prior to
the Closing Date, COMPANY may retain copies of any financial statements prepared
by KPMG Peat Marwick LLP only if (i) such termination is not based on Section
7.9 or a material breach or default by any STOCKHOLDER or COMPANY and (ii)
COMPANY reimburses URSI for all fees paid to KPMG Peat Marwick LLP. In no event
shall COMPANY or any STOCKHOLDER use any such financial statement within one
year of the termination of this Agreement in connection with any merger or
consolidation of COMPANY with or into any entity in a consolidation transaction
substantially similar to URSI's proposed transaction with the COMPANY and the
Other Companies as contemplated by this Agreement and the Other Agreements.
13. NONCOMPETITION.
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the vehicle
towing, transport, salvage or auction businesses, within one hundred (100) miles
of where the COMPANY conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of URSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of URSI (including the subsidiaries thereof),
provided that any STOCKHOLDER shall be permitted to call upon and hire any
member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of URSI
(including the subsidiaries thereof) within the Territory for the purpose of
soliciting or selling products or services in direct competition with URSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the vehicle towing or
transport business, which candidate was either called upon by URSI (including
the subsidiaries thereof) or for which URSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity,
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provided that no STOCKHOLDER shall be charged with a violation of this Section
unless and until such STOCKHOLDER shall have knowledge or notice that such
prospective acquisition candidate was called upon, or that an acquisition
analysis was made, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY's Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to URSI or any of URSI's Subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any STOCKHOLDER from acquiring as an investment not more than
three percent (3%) of the capital stock of any business whose stock is traded on
a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
URSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to URSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by URSI, in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of URSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of URSI; but it is also the intent of URSI and the STOCKHOLDERS
that such covenants be construed and enforced in accordance with the changing
activities and business of URSI (including the subsidiaries thereof) throughout
the term of this covenant.
It is further agreed by the parties hereto that, in the event that
any STOCKHOLDER who has entered into an Employment Agreement shall thereafter
cease to be employed thereunder, and such STOCKHOLDER shall enter into a
business or pursue other activities not in competition with URSI and/or any
subsidiary thereof, or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (i) of this Section
13, and in any event such new business, activities or location are not in
violation of this Section 13 or of such STOCKHOLDER's obligations under this
Section 13, if any, such STOCKHOLDER shall not be chargeable with a violation of
this Section 13 if URSI and/or any subsidiary thereof shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
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13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against URSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
URSI of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in this Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto, except that upon URSI's admission in
writing, or a final judicial determination which is not the subject of appeal or
further appeal by URSI, that URSI has materially breached a STOCKHOLDER's
Employment Agreement (if applicable), right to have URSI Stock registered under
the 1933 Act pursuant to Section 17.1 or 17.2, or right to receive contingent
consideration as provided in section C of Annex I, and URSI's failure to cure
such material breach within 30 days of such admission or final judicial
determination, whichever is applicable, then the covenants contained in this
Section 13 with respect to such STOCKHOLDER will expire. The covenants contained
in this Section 13 shall have no effect if the transactions contemplated by this
Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or URSI, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or URSI's respective
businesses. The STOCKHOLDERS agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever,
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except (a) to authorized representatives of URSI, (b) following the Closing
Date, as required in the course of performing their duties for URSI, and (c) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1; provided, further,
that confidential information shall not include (i) such information which
becomes known to the public generally through no fault of the STOCKHOLDERS, (ii)
information required to be disclosed by law or the order of any governmental
authority under color of law, provided that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give prior
written notice thereof to URSI and provide URSI with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
STOCKHOLDERS of the provisions of this section, URSI shall be entitled to an
injunction restraining such STOCKHOLDERS from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
URSI from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
14.2 URSI. URSI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANY, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. URSI agrees that,
prior to the Closing, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies other than the COMPANY and their representatives pursuant to
Section 7.1(i), unless (i) such information becomes known to the public
generally through no fault of URSI (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), URSI shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. Upon termination of this Agreement prior to the Closing Date
for any reason other than the material breach or default of any STOCKHOLDER or
COMPANY, URSI will return to COMPANY all documents containing confidential
information of COMPANY that were provided to URSI by COMPANY or STOCKHOLDERS and
all summaries, abstractions, projections, pro formas or like material prepared
by URSI incorporating such confidential information. In the event of a breach or
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threatened breach by URSI of the provisions of this section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining URSI from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1 Transfer Restrictions. Except for transfers pursuant to Section 17
hereof and except for transfers as set forth in Section 15.2 below to persons or
entities who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Closing Date none of the STOCKHOLDERS
shall (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of (a) any shares of URSI Stock received by the
STOCKHOLDERS in the Merger, or (b) any interest (including, without limitation,
an option to buy or sell) in any such shares of URSI Stock, in whole or in part,
and no such attempted transfer shall be treated as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of
URSI Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of URSI Stock acquired pursuant to Section 2
hereof (including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the URSI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as URSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE,
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PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[insert the first anniversary of the Closing Date]. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 Permitted Transferees. Notwithstanding the provisions of Section
15.1, a STOCKHOLDER shall have the right to transfer some or all of the shares
of URSI stock to any one or more of the following, provided that the transferee
agrees to be bound (in a form satisfactory to URSI and its counsel) by the terms
and conditions of this Agreement with respect to any further transfer of such
shares: (a) any family member of a STOCKHOLDER (including, without limitation,
any transfer to a custodian under any gift to minors statute), with family
members being defined as any spouse, lineal descendant or ancestor of a
STOCKHOLDER), (b) any trust which is for the benefit of one or more family
members of a STOCKHOLDER and (c) any corporation, partnership, limited liability
company or other entity (x) of which a majority of the interests therein by
value is owned by the STOCKHOLDER and members of the STOCKHOLDER's family, and
(y) which is and continues to be controlled by the STOCKHOLDER and members of
the STOCKHOLDER'S family for the period set forth in Section 15.1.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
The STOCKHOLDERS acknowledge that the shares of URSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The URSI Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of URSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the URSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR
OTHERWISE
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TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933 ACT AND
APPLICABLE SECURITIES LAWS.
16.2 Accredited Investors; Economic Risk; Sophistication. Except as
disclosed on Schedule 16.2, each STOCKHOLDER represents and warrants that such
STOCKHOLDER is an "accredited investor," as that term is defined in Regulation D
promulgated by the SEC under the 1933 Act. The STOCKHOLDERS are able to bear the
economic risk of an investment in the URSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
URSI Stock. The STOCKHOLDERS or their respective purchaser representatives have
had an adequate opportunity to ask questions and receive answers from the
officers of URSI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of URSI, the plans for the
operations of the business of URSI, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like.
17. REGISTRATION RIGHTS.
17.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever URSI proposes to register any URSI Stock for its own or others'
account under the 1933 Act for a public offering, other than (i) registrations
of shares to be used as consideration for acquisitions of additional businesses
by URSI and (ii) registrations relating to employee benefit plans, URSI shall
give each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon
the written request of any of the STOCKHOLDERS given within thirty (30) days
after receipt of such notice, URSI shall cause to be included in such
registration all of the URSI Stock issued pursuant to this Agreement which any
such STOCKHOLDER requests, provided that URSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to URSI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a reorganization described in Section 368(a)(1)(A)
of the Code. In addition, if URSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than URSI is greater than the number of
such shares which can be offered without adversely affecting the offering, URSI
may reduce the number of shares offered for the accounts of such persons to a
number deemed satisfactory by such managing underwriter,
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provided that such reduction shall be made first by reducing the number of
shares to be sold by persons other than URSI, the stockholders named on Annex
III hereto, the stockholders of the Founding Companies, and any person or
persons who have required such registration pursuant to "demand" registration
rights granted by URSI; thereafter, if a further reduction is required, it shall
be made first by reducing the number of shares to be sold by the stockholders
named on Annex III hereto and the stockholders of the Founding Companies, with
such further reduction being made so that to the extent any shares can be sold
by stockholders named in Annex III hereto and the stockholders of the Founding
Companies, each such stockholder will be permitted to sell a number of shares
proportionate to the number of shares of URSI Stock owned by such stockholder
immediately after the Closing, provided that if any stockholder does not wish to
sell all shares such stockholder is permitted to sell, the opportunity to sell
additional shares shall be reallocated in the same manner to those stockholders
named in Annex III hereto and stockholders of the Founding Companies who wish to
sell more shares until no more shares can be sold by such stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing Date, the holders of shares of URSI Stock issued to the
Founding Stockholders pursuant to this Agreement and the Other Agreements which
have (i) not been previously registered or sold, (ii) which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) and (iii)
which have an aggregate market value in excess of $5 million (based on the
average closing price on the five days prior to the date of such request)
promulgated under the 1933 Act may request in writing that URSI file a
registration statement under the 1933 Act covering the registration of the
shares of URSI Stock issued to the Founding Stockholders pursuant to this
Agreement and the Other Agreements disclosed in the Registration Statement then
held by such Founding Stockholders (a "Demand Registration"). Within ten (10)
days of the receipt of such request, URSI shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable,
file and use its best efforts to cause to become effective a registration
statement covering all such shares. URSI will use its best efforts to keep such
Demand Registration current and effective for one hundred twenty (120) days (or
such shorter period during which holders shall have sold all URSI Stock which
they requested to be registered). URSI shall be obligated to effect only two (2)
Demand Registrations for all Founding Stockholders, and the second request may
not be made until at least one (1) year after the effective date of the
registration statement for the first Demand Registration.
Notwithstanding the foregoing paragraph, following such a demand a
majority of the COMPANY's disinterested directors (i.e, directors who have not
demanded or elected to sell shares in any such public offering) may
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postpone the filing of the registration statement for a thirty (30) day period
beyond the period provided above.
If at the time of any request by the Founding Stockholders for a
Demand Registration URSI has fixed plans to file within sixty (60) days after
such request a registration statement covering the sale of any of its securities
in a public offering under the 1933 Act, no registration of the Founding
Stockholders' URSI Stock shall be initiated under this Section 17.2 until ninety
(90) days after the effective date of such registration unless URSI is no longer
proceeding diligently to effect such registration; provided that URSI shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
In addition, in the event that a STOCKHOLDER is required to
indemnify URSI pursuant to Section 11 herein, and the amount of the
indemnification obligation exceeds the amount of cash such STOCKHOLDER received
from URSI on the date of the IPO plus the net proceeds received by such
STOCKHOLDER from sales of URSI Stock received pursuant to Section 2.2 hereof
prior to the time such claim is paid, such STOCKHOLDER may request in writing
that URSI file a registration statement under the 1933 Act requesting such
number of such STOCKHOLDER's shares of URSI Stock as is required to be sold to
pay the difference between the cash proceeds and the amount of the
indemnification obligation, plus legal and other expenses, including expenses of
the offering, provided arrangements are made to URSI's reasonable satisfaction
that the proceeds will be used solely for the purpose of such indemnification
and the payment of related expenses and that arrangements are made to the
reasonable satisfaction of URSI that the proceeds of such sale will be used
solely for the purpose of such indemnification and the payment of related
expenses, and that no such request may be made until after one hundred eighty
(180) days following the Closing Date without the consent of the managing
underwriter.
17.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), other than a request pursuant to the last paragraph
of Section 17.2, shall be borne by URSI. In connection with registrations under
Sections 17.1 and 17.2, URSI shall (i) prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the URSI Stock
and use its best efforts to cause such registration to promptly become and
remain effective for a period of at least one hundred twenty (120) days (or such
shorter period during which holders shall have sold all URSI Stock which they
requested to be registered); (ii) use its best efforts to register and qualify
the URSI Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request
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for the distribution for the URSI Stock; and (iii) take such other actions as
are reasonable and necessary to comply with the requirements of the 1933 Act and
the regulations thereunder.
17.4 Underwriting Agreement. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
URSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of URSI's size and investment stature,
including indemnification. In a registration under Section 17.1, the managing
underwriters shall be selected by URSI (or, if required by a "demand"
registration right of a stockholder requiring such registration, by such
requiring stockholder), and in a registration under Section 17.2, may be
selected by the holders of a majority of the shares that have demanded to be
included in such registration pursuant to Section 17.2, provided the managing
underwriters so selected by such majority are reasonably acceptable to URSI.
17.5 URSI Stock. For the purposes of this Section 17, URSI Stock issued
pursuant to this Agreement shall include shares issued as a stock dividend or
stock split, or otherwise distributed by URSI to its stockholders without
consideration, in respect of shares of URSI Stock previously issued pursuant to
this Agreement.
17.6 Availability of Rule 144. URSI shall not be obligated to register
shares of URSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.7 Survival. The provisions of this Section 17 shall survive the
Pre-Closing and Closing Date until December 31, 2001.
18. GENERAL.
18.1 Cooperation. The COMPANY, STOCKHOLDERS and URSI shall each (i)
attempt in good faith (without being required to incur unreasonable expense) to
cause all conditions to actions to be taken on the Pricing Date and the Closing
Date to be satisfied, and (ii) deliver or cause to be delivered to the other on
the Pricing Date and Closing Date, and at such other times and places as shall
be reasonably agreed to, such additional instruments, and take such additional
actions as can be taken without unreasonable expense, as any other may
reasonably request for the purpose of carrying out this Agreement. The COMPANY
will cooperate and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with URSI on and after the
Closing Date in furnishing information, evidence, testimony and
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other assistance in connection with any Return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
URSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and URSI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms. Except as otherwise stated herein, this Agreement and
the Annexes hereto may be modified or amended only by a written instrument
executed by the STOCKHOLDERS, the COMPANY and URSI, acting through their
respective officers, duly authorized by their respective Boards of Directors.
Any disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) URSI will pay the fees, expenses and disbursements of URSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by URSI under this Agreement, including the fees and
expenses of KPMG Peat Marwick LLP (including fees and expenses of such firm, if
any, arising from services contemplated by Section 7.11) and Howard Rice, and
the costs of preparing the Registration Statement, and (ii) the STOCKHOLDERS
will pay from
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personal funds and not from COMPANY funds, the fees, expenses and disbursements
of their counsel and accountants for the STOCKHOLDERS and the COMPANY incurred
in connection with the subject matter of this Agreement or the Registration
Statement. The STOCKHOLDERS shall pay all sales, use, transfer, recording,
gains, stock transfer and other similar taxes and fees ("Transfer Taxes")
incurred in connection with the transactions contemplated by this Agreement. The
STOCKHOLDERS shall file all necessary documentation and Returns with respect to
such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he, and not
the COMPANY or URSI, will pay all taxes due upon receipt of the consideration
payable to such STOCKHOLDER pursuant to Section 2 hereof. Notwithstanding the
foregoing, any of the above fees, expenses or disbursements fairly attributable
to the Company but payable by the STOCKHOLDERS and incurred prior to the Pricing
Date may be paid from COMPANY funds rather than from personal funds of the
STOCKHOLDERS, provided that the STOCKHOLDERS provide to URSI, prior to the
Pricing Date, a detailed statement setting forth the type and amount of all such
fees, expenses or disbursements so paid, and, provided further, that the
aggregate amount of same shall be deducted, on a dollar-for-dollar basis, from
the amount of cash into which the COMPANY Stock shall be converted pursuant to
Section 2.2 hereof. Notwithstanding the foregoing provisions of Section 18.6,
URSI shall further pay or reimburse reasonable costs of counsel or co-counsel
for the Company if and to the extent so mutually agreed in advance between URSI
and such counsel, in circumstances where URSI believes it obtained or may have
obtained a material benefit, in light of market conditions and other factors, by
reason of such counsel or co-counsel expediting the transaction which is the
subject of this Agreement and reducing the time required to complete this
Agreement and the Other Agreements.
18.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to such party (in the case of a STOCKHOLDER) or to an officer, general
partner, member or trustee of such party (in the case of parties other than
STOCKHOLDERS).
(a) If mailed to URSI addressed to it at:
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attn: Edward T. Sheehan, Chief Executive Officer
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with copies to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation
3 Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Attn: Daniel J. Winnike
(b) If mailed to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex II, with copies to such counsel as is set forth
with respect to each STOCKHOLDER on such Annex II;
(c) If mailed to the COMPANY, addressed to it at:
Silver State Tow & Recovery, Inc.
d/b/a Milne Tow Service
1700 17th Marietta Way
Sparks, NV 89431
Attn: Eugene E. Temen
and marked "Personal and Confidential" with copies to:
Robert C. Anderson, Esq.
Hale, Lane, Peek, Dennison, Howard, Anderson and Pearl
100 West Liberty Street, 10th Floor
Reno, NV 89501
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the party or an officer,
general partner, member or trustee of the party, as applicable.
18.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to laws concerning choice of law or conflicts of law. All disputes
arising out of this Agreement or the obligations of the parties hereunder and
initiated by any STOCKHOLDER or, prior to the Closing Date, the COMPANY,
including disputes that may arise following termination of this Agreement, shall
be subject to the exclusive jurisdiction and venue of the New York State courts
of Albany County, New York (or, if there is federal jurisdiction, then the
exclusive jurisdiction and venue of the United States District Court having
jurisdiction over Albany County). All disputes arising out of this Agreement or
the obligations of the parties hereunder and initiated by URSI or the
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Surviving Company, including disputes that may arise following termination of
this Agreement,shall be subject to the exclusive jurisdiction and venue of the
Nevada state court of general jurisdiction in Washoe County, Nevada (or, if
there is federal jurisdiction, then the exclusive jurisdiction and venue of the
United States District Court having jurisdiction over Washoe County). The
parties hereby consent to the personal and exclusive jurisdiction and venue of
said courts.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
-70-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: UNITED ROAD SERVICES, INC.
By
- ----------------------------------- -----------------------------------
Name:
Title:
WITNESS: STOCKHOLDERS:
- ----------------------------------- -------------------------------------
Eugene Earl Temen
- ----------------------------------- -------------------------------------
Marlys Temen
- ----------------------------------- -------------------------------------
Barbara B. Caron
WITNESS: SILVER STATE TOW & RECOVERY,
INC.
By
- ----------------------------------- -----------------------------------
Name:
Title:
-71-
<PAGE>
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
UNITED ROAD SERVICES, INC.,
SILVER STATE TOW & RECOVERY, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO FOUNDING COMPANY STOCKHOLDERS
Part I
A. Aggregate fixed consideration to be paid to STOCKHOLDERS:
1. $1,872,520 in cash.
2. 156,043 shares of URSI Stock.
3. At the midrange IPO initial public offering price of $12, the aggregate
value of cash and URSI Stock would be $3,745,040.
4. STOCKHOLDERS and the COMPANY will not be obligated to consummate the
Merger if the aggregate value of cash and URSI Stock (valued at the IPO initial
public offering price) is less than the Minimum Value of $3,510,970.
B. Fixed consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of URSI Cash
Eugene Earl Temen 133,417 $1,601,005
Marlys Temen 22,626 $271,515
-------- -----------
TOTALS: 156,043 $1,872,520
C. Contingent (earnout) consideration to be paid to STOCKHOLDERS:
1. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 1 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 1 Payout Date.
<PAGE>
b. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date, provided that Year 2 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
c. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
d. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
e. Five percent (5%) of Year 1 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 1 Actual Revenues.
2. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 2 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 2 Payout Date.
b. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date, provided that Year 3 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
c. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
d. Five percent (5%) of Year 2 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 2 Actual Revenues.
3. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 3 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 3 Payout Date.
b. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date, provided that Year 4 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
<PAGE>
c. Five percent (5%) of Year 3 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 3 Actual Revenues.
4. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 4 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 4 Payout Date.
b. Five percent (5%) of Year 4 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date, provided that Year 5 Actual
Revenues are equal to or greater than Year 4 Actual Revenues.
5. If STOCKHOLDERS have the right to be paid contingent consideration and
Year 5 Excess Revenues are greater than zero, then:
a. Five percent (5%) of Year 5 Excess Revenues will be paid to
STOCKHOLDERS on or about the Year 5 Payout Date.
6. For purposes of calculating the contingent consideration:
a. "Revenues" means that portion of the revenues reported by URSI
for a fiscal year that are generated by operations acquired by URSI by means of
the Merger, provided that revenues reported by URSI for fiscal year 1998 will be
adjusted to reflect revenues of COMPANY from January 1, 1998 until the Closing
Date.
b. "Year 1 Actual Revenues" means Revenues for fiscal year 1998.
c. "Year 2 Actual Revenues" means Revenues for fiscal year 1999.
d. "Year 3 Actual Revenues" means Revenues for fiscal year 2000.
e. "Year 4 Actual Revenues" means Revenues for fiscal year 2001.
f. "Year 5 Actual Revenues" means Revenues for fiscal year 2002.
g. "Year 1 Target Revenues" means $3,449,468.
<PAGE>
h. "Year 2 Target Revenues" means the greater of (i) 110% of Year 1
Actual Revenues or (ii) 110% of Year 1 Target Revenues.
i. "Year 3 Target Revenues" means the greater of (i) 110% of Year 2
Actual Revenues or (ii) 110% of Year 2 Target Revenues.
j. "Year 4 Target Revenues" means the greater of (i) 110% of Year 3
Actual Revenues or (ii) 110% of Year 3 Target Revenues.
k. "Year 5 Target Revenues" means the greater of (i) 110% of Year 4
Actual Revenues or (ii) 110% of Year 4 Actual Revenues.
l. "Year 1 Excess Revenues" means the excess, if any, of Year 1
Actual Revenues over Year 1 Target Revenues. If Year 1 Target Revenues are equal
to or greater than Year 1 Actual Revenues, Year 1 Excess Revenues are zero.
m. "Year 2 Excess Revenues" means the excess, if any, of Year 2
Actual Revenues over Year 2 Target Revenues. If Year 2 Target Revenues are equal
to or greater than Year 2 Actual Revenues, Year 2 Excess Revenues are zero.
n. "Year 3 Excess Revenues" means the excess, if any, of Year 3
Actual Revenues over Year 3 Target Revenues. If Year 3 Target Revenues are equal
to or greater than Year 3 Actual Revenues, Year 3 Excess Revenues are zero.
o. "Year 4 Excess Revenues" means the excess, if any, of Year 4
Actual Revenues over Year 4 Target Revenues. If Year 4 Target Revenues are equal
to or greater than Year 4 Actual Revenues, Year 4 Excess Revenues are zero.
p. "Year 5 Excess Revenues" means the excess, if any, of Year 5
Actual Revenues over Year 5 Target Revenues. If Year 5 Target Revenues are equal
to or greater than Year 5 Actual Revenues, Year 5 Excess Revenues are zero.
q. "Year 1 Payout Date" means thirty days (30) days after URSI
announces its revenues and earnings for fiscal year 1998.
r. "Year 2 Payout Date" means thirty days (30) after URSI announces
its revenues and earnings for fiscal year 1999.
s. "Year 3 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2000.
<PAGE>
t. "Year 4 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2001.
u. "Year 5 Payout Date" means thirty (30) days after URSI announces
its revenues and earnings for fiscal year 2002.
7. URSI will be entitled to make decisions that impact Revenues, including
without limitation decisions regarding the allocation and non-allocation of
capital and other resources, decisions regarding business that will be accepted
or rejected, personnel decisions including decisions to lay off employees, and
decisions to shut down or downsize operations, all without making any offsetting
adjustments to Revenues or contingent consideration, provided only that such
decisions are made in a good faith effort to maximize total return to the
shareholders of URSI to the extent that the same can be realized without undue
risk and in compliance with applicable laws.
8. If the fiscal year of URSI is changed or operations acquired by URSI by
means of the Merger are sold, a reasonable adjustment will be made to these
provisions so that the contingent consideration paid to STOCKHOLDERS will be
approximately the same as it would have been if the fiscal year had not been
changed or the sale had not been made, as applicable.
9. The contingent consideration will be paid in URSI Stock, without
interest (even though interest may be imputed for purposes such as income
taxes).
10. For purposes of determining the number of shares of URSI Stock to be
paid as contingent consideration, URSI Stock will be valued at Fair Market Value
as of the trading day the day before the contingent consideration is paid. "Fair
Market Value" of the URSI Stock as of a date means the market price per share of
such Shares determined by the Board of Directors of URSI as follows: (a) if the
URSI Stock is traded on a stock exchange on the date in question, then the Fair
Market Value will be equal to the closing price reported by the applicable
composite-transactions report for such date; (b) if the URSI Stock is traded
over-the-counter on the date in question and is classified as a national market
issue, then the Fair Market Value will be equal to the last-transaction price
quoted by the NASDAQ system for such date; (c) if URSI Stock is traded
over-the-counter on the date in question but is not classified as a national
market issue, then the Fair Market Value will be equal to the mean between the
last reported representative bid and asked prices quoted by the NASDAQ system
for such date; and (d) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Board of Directors of URSI in
good faith on such basis as it deems appropriate.
<PAGE>
11. Despite anything to the contrary in this Annex I or elsewhere in the
Agreement, the total number of shares of URSI Stock issued to STOCKHOLDERS as
contingent consideration will not exceed the total number of shares of URSI
Stock issued to STOCKHOLDERS as fixed consideration, and contingent
consideration will be reduced to the extent (if any) necessary so that this
limitation will not be exceeded.
12. Any dispute concerning the amount of contingent consideration or the
number of shares of URSI Stock to be paid will be finally determined by the
independent certified public accountants engaged by URSI to audit the financial
statements of URSI for its most recently completed fiscal year.
13. The right to be paid contingent consideration is personal and cannot
be assigned by any STOCKHOLDER without the consent of URSI except upon the death
of the STOCKHOLDER.
14. The contingent consideration is not in any way dependent upon any
STOCKHOLDER being or remaining employed by URSI.
D. Contingent consideration (if any) to be paid to each STOCKHOLDER in the
following proportions:
STOCKHOLDER Percentage
----------- ----------
Eugene Earl Temen 85.5%
Marlys Temen 14.5%
----
Total: 100%
<PAGE>
Part II
Aggregate fixed consideration to be paid to the stockholders of each
Other Company:
Percentage of
Percentage of Fixed
Total Fixed Consideration
Shares of Consideration to be paid in
Common Stock to be paid Common Stock
Other Company of URSI in Cash of URSI
Absolute Towing and
Transporting, Inc. 297,267 50% 50%
ASC Transportation
Services 137,554 50% 50%
Caron Auto Brokers,
Inc. 125,000 50% 50%
Caron Auto Works,
Inc. 125,000 50% 50%
Falcon Towing and
Auto Delivery, Inc. 356,950 50% 50%
Keystone Towing,
Inc. 377,624 50% 50%
Northland Auto
Transporters, Inc. 588,435 50% 50%
Northland Fleet
Leasing Company 103,842 50% 50%
Smith-Christensen
Enterprises, Inc. 485,750 47% 53%
Total Shares 2,597,422
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED ROAD SERVICES, INC.
United Road Services, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The original Certificate of Incorporation (the "Original Certificate")
of the Corporation was filed with the Secretary of State of the State of
Delaware on July 25, 1997, under the name, Towing America, Inc.
2. Pursuant to Sections 242 and 245 of the Delaware General Corporation
Law, this Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Corporation's Certificate of
Incorporation.
3. The terms and provisions of this Amended and Restated Certificate of
Incorporation have been duly adopted pursuant to the provisions of Sections 242
and 245 of the Delaware General Corporation Law.
4. The text of the Original Certificate is hereby restated and further
amended to read in its entirety as follows:
FIRST. The name of the Corporation is United Road Services, Inc.
SECOND. The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, Dover, County of Kent. The name of its
registered agent at that address is Incorporating Services, Ltd.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
-1-
<PAGE>
FOURTH. The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock". The total
number of shares which the corporation shall have the authority to issue is
40,000,000 shares of capital stock divided into (a) 35,000,000 shares of Common
Stock having a par value of $0.001 per share, and (b) 5,000,000 shares of
Preferred Stock having a par value of $0.001 per share.
Effective upon the amendment of this article to read as herein set
forth, each share of the Corporation's Common Stock outstanding immediately
prior to such effectiveness shall be split up and converted into 3.72 shares of
Common Stock. No fractional shares of Common Stock will be issued upon such
conversion and any fractional share which otherwise would result shall be
rounded up or down to the nearest whole share.
FIFTH. The Preferred Stock of the Corporation may be issued from time to
time in one or more series. Subject to the restrictions prescribed by law, the
Board of Directors is authorized to fix by resolution or resolutions the number
of shares of any series of Preferred Stock and to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock and, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series of Preferred Stock, to
increase (but not above the total number of authorized shares of Preferred
Stock) or decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issue of
shares of that series.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following: (a) the number of shares constituting that series and the distinctive
designation of that series; (b) the dividend rate on the shares of that series
and the relative rights of priority, if any, of payment of dividends on shares
of that series; (c) whether that series shall have voting rights in addition to
the voting rights provided by law, and if so, the terms of such voting rights;
(d) whether that series shall have conversion privileges, and if so, the terms
and conditions of such privilege, including provision for adjustment of the
conversion rate in such events as the Board of Directors shall determine; (e)
whether that series shall be subject to
-2-
<PAGE>
redemption, the terms and conditions of any such redemption, including the date
or dates upon or after which such series shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; (f) whether that series shall have
a sinking fund for the redemption or purchase of shares of that series, and if
so, the terms and the amount of such sinking funds; (g) the rights of the shares
of that series in the event of voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, and the relative rights of priority, if any,
of payment of shares of that series; and (h) any other relative rights,
preferences and limitations of that series.
SIXTH. The Board of Directors of the Corporation is expressly authorized
to make, alter or repeal bylaws of the corporation, but the stockholders may
make additional bylaws and may alter or repeal any bylaw whether adopted by them
or otherwise.
SEVENTH. Elections of directors need not be by written ballot except and
to the extent provided in the bylaws of the Corporation.
The directors shall be divided into three classes (I, II, III). The
number of directors comprising each class (assuming no vacancy in any class)
shall be as nearly equal in number as possible based upon the number of
directors comprising the entire Board of Directors. The Board shall, at or
before the first meeting of the Board of Directors following the time of filing
of this Amended and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware (the "Effective Time"), designate the class to
which each director then serving shall be a member. The initial terms of the
directors in Class I shall extend until the first annual meeting of stockholders
following the Effective Time; the initial term of directors in Class II shall
extend until the second annual meeting of the stockholders following the
Effective Time; and the initial terms of the directors in Class III shall extend
until the third annual meeting of stockholders following the Effective Time. At
each annual meeting of stockholders, successors to directors of the class whose
term expires at such meeting will be elected to serve for three-year terms and
until their successors are elected and qualified.
Subject to the rights of the holders of any class or series of Preferred
Stock then outstanding, newly created directorships
-3-
<PAGE>
resulting from any increase in the number of directors or any vacancies in the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or any other cause may be filled by the
Board of Directors (and not by the stockholders unless there are no directors
then in office), provided that a quorum is then in office and present, or by a
majority of the directors then in office, if less than a quorum is then in
office, or by the sole remaining director. A director elected to fill a newly
created directorship or other vacancy shall hold office for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until such director's successor has been elected and
qualified.
EIGHTH. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Neither the amendment nor repeal of this Article
EIGHTH, nor the adoption of any provision of the Certificate of Incorporation or
bylaws or of any statute inconsistent with this Article EIGHTH, shall eliminate
or reduce the effect of this Article EIGHTH in respect of any acts or omissions
occurring, or any causes of action, suits or claims that, but for this Article
EIGHTH, would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
NINTH. The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained herein, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed by law, and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other person whomsoever by or pursuant to the
Certificate of Incorporation in its present form or as hereafter amended are
granted, subject to the rights reserved in this Article NINTH.
-4-
<PAGE>
TENTH. Subject to the rights, if any, of holders of any class or series of
Preferred Stock then outstanding, (i) stockholders are not permitted to call a
special meeting of stockholders or to require the Board of Directors or officers
of the Corporation to call such a special meeting, (ii) a special meeting of
stockholders may only be called by a majority of the Board of Directors or by
the Chief Executive Officer, (iii) the business permitted to be conducted at a
special meeting of stockholders shall be limited to matters properly brought
before the meeting by or at the direction of the Board of Directors, and (iv)
any action required or permitted to be taken by the stockholders must be taken
at a duly called and convened annual meeting or special meeting of stockholders
and cannot be taken by consent in writing; provided, however, that the
provisions of the foregoing clause (iv) shall not apply prior to the
consummation of an initial underwritten public offering of the Corporation's
Common Stock that is registered with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, (an "IPO").
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be duly executed this ____ day of February,
1998.
UNITED ROAD SERVICES, INC.
--------------------------------
Ross Berner, Assistant Secretary
-5-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS OF
UNITED ROAD SERVICES, INC.
ARTICLE I
OFFICES
Section 1.01. Registered Office. The registered office of United
-----------------
Road Services, Inc. (hereafter called the "Corporation") in the State of
Delaware shall be at 15 East North Street, Dover, County of Kent, and the name
of the registered agent at that address shall be Incorporating Services, Ltd.
Section 1.02. Principal Office. The principal office for the
----------------
transaction of the business of the Corporation shall be at 15 East North Street,
Dover, County of Kent. The Board of Directors (hereafter called the "Board") is
hereby granted full power and authority to change said principal office from one
location to another.
Section 1.03. Other Offices. The Corporation may also have an office
-------------
or offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Annual Meetings. Annual meetings of the stockholders
---------------
of the Corporation for the purpose of electing directors and for the transaction
of such other proper business as may come before such meetings shall be held on
a specific date and at a time designated by the Board.
Section 2.02. Special Meetings. Stockholders are not permitted to
----------------
call a special meeting of stockholders or to require the Board of Directors or
officers of the Corporation to call such a
<PAGE>
special meeting. A special meeting of the stockholders for any purpose or
purposes may only be called by a majority of the Board of Directors or by the
Chief Executive Officer. The business permitted to be conducted at a special
meeting of stockholders shall be limited to matters properly brought before the
meeting by or at the direction of the Board of Directors.
Section 2.03. Place of Meetings. All meetings of the stockholders
-----------------
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
Section 2.04. Notice of Meetings. Except as otherwise required by
------------------
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at their post office address furnished by him to the
Secretary of the Corporation for such purpose or, if he shall not have furnished
to the Secretary his address for such purpose, then at his post office address
last known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly
required by law, no publication of any notice of a meeting of the stockholders
shall be required. Every notice of a meeting of the stockholders shall state
the place, date and hour of the meeting, and, in the case of a special meeting,
shall also state the purpose or purposes for which the meeting is called.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall have waived such notice and such notice shall be deemed
waived by any stockholder who shall attend such meeting in person or by proxy,
except a stockholder who shall attend such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Except as otherwise
expressly required by law, notice of any adjourned meeting of the stockholders
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken.
-2-
<PAGE>
Section 2.05. Advance Notification of Director Nomination. Only
-------------------------------------------
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of the Corporation at the annual meeting may be made at such
meeting by or at the direction of the Board of Directors, by any committee
appointed by the Board of Directors or by any common stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 2.05. Such
nominations, other than those made by or at the direction of the Board of
Directors or by any committee appointed by the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not later than the close of
business on the 60th day nor earlier than the close of business on the 90th day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. Such stockholder's notice to the
Secretary shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class, series and number of shares of
capital stock of the Corporation which are beneficially owned by the person and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to the
Rules and Regulations of the Securities and Exchange Commission under Section 14
of the Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving the notice (i) the name and record address of the
stockholder, (ii) the class, series and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder and (iii) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made
-3-
<PAGE>
by the stockholder. Such notice shall be accompanied by the executed consent of
each nominee to serve as a director if so elected. The Corporation may require
any proposed nominee to furnish such other information as may reasonably be
required by the Corporation to determine the eligibility of such proposed
nominee to serve as a director of the Corporation. No person shall be eligible
for election as a director of the Corporation by the holders of Common Stock of
the Corporation unless nominated in accordance with the procedures set forth
herein. The officer of the Corporation presiding at an annual meeting shall, if
the facts warrant, determine that a nomination was not made in accordance with
the foregoing procedure and, if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.
Section 2.06. Advance Notification of Business to be Transacted at
----------------------------------------------------
Stockholder Meetings. To be properly brought before the annual meeting of
- --------------------
stockholders, business must be either (a) specified in the notice of meeting (or
any supplement or amendment thereto) given by or at the direction of the Board
of Directors or any committee appointed by the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before an annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before any annual meeting of stockholders by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
Corporation. Such stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the meeting (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such
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business at the meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class, series and number of shares of capital
stock of the Corporation which are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business.
No business shall be conducted at the annual meeting of stockholders
unless it is properly brought before the meeting in accordance with the
procedures set forth in this Section 2.06, provided, however, that nothing in
-------- -------
this Section 2.06 shall be deemed to preclude discussion by any stockholder of
any business properly brought before the meeting in accordance with the
procedures set forth in this Section 2.06. The officer of the Corporation
presiding at the meeting shall, if the facts warrant, determine that business
was not properly brought before the meeting in accordance with the provisions of
this Section 2.06 and, if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
Section 2.07. Quorum. Except in the case of any meeting for the
------
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. Where a separate
vote by a class or classes is required, a majority of the outstanding shares of
such class or classes, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and the affirmative vote of the majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class. In the absence of a quorum at any meeting or any adjournment
thereof, a majority in voting interest of the stockholders present in person or
by proxy and entitled to vote thereat or, in the absence therefrom of all the
stockholders, any officer entitled to preside at, or to act as secretary of,
such meeting may adjourn such meeting from time to time. At any such adjourned
meeting at which a quorum is present any business may be transacted which might
have been transacted at the meeting as originally called. No business may be
transacted at a meeting in the absence of a quorum other than the adjournment of
such meeting, except that if a quorum is present at the commencement of a
meeting, business may be transacted until the
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meeting is adjourned even though the withdrawal of stockholders results in less
than a quorum.
Section 2.08. Voting.
------
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these
Bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then
(a) at the close of business on the day next preceding the day on
which notice of the meeting shall be given or (b) if notice of the
meeting shall be waived, at the close of business on the day next
preceding the day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Nothing in this section shall be construed as limiting the right of
the Corporation to vote stock, including but not limited to its own stock, held
by it in a fiduciary capacity. Persons holding stock of the Corporation in a
fiduciary capacity shall be entitled to vote such stock. Persons whose stock is
pledged shall be entitled to vote, unless in the transfer by the pledgor on the
books of the Corporation he shall have expressly empowered the pledgee to vote
thereon, in which case only the pledgee, or their proxy, may represent such
stock and vote thereon. Stock having voting power standing of record in the
names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or with
respect to which two or more persons have the same fiduciary relationship, shall
be voted in accordance with the provisions of the General Corporation Law of the
State of Delaware.
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(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by their proxy appointed by an instrument in
writing, subscribed by such stockholder or by their attorney thereunto
authorized and delivered to the secretary of the meeting; provided, however,
that no proxy shall be voted or acted upon after three years from its date
unless said proxy shall provide for a longer period. The attendance at any
meeting of a stockholder who may theretofore have given a proxy shall not have
the effect of revoking the same unless he shall in writing so notify the
secretary of the meeting prior to the voting of the proxy. At any meeting of
the stockholders all matters, except as otherwise provided in the Certificate of
Incorporation, in these Bylaws or by law, shall be decided by the vote of a
majority of the shares present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any questions need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by their proxy, if there be such proxy, and it shall
state the number of shares voted.
Section 2.09. List of Stockholders. The Secretary of the Corporation
--------------------
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the duration thereof, and may be inspected by any stockholder who is
present.
Section 2.10. Judges. If at any meeting of the stockholders a vote
------
by written ballot shall be taken on any question, the chairman of such meeting
may appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of
their ability. Such judges shall decide upon the qualification of the voters
and shall report the number of shares represented at the meeting
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and entitled to vote on such questions, shall conduct and accept the votes, and,
when the voting is completed, shall ascertain and report the number of shares
voted respectively for and against the question. Reports of judges shall be in
writing and subscribed and delivered by them to the Secretary of the
Corporation. The judges need not be stockholders of the Corporation, and any
officer of the Corporation may be a judge on any question other than a vote for
or against a proposal in which he shall have a material interest.
Section 2.11. Prohibition of Action by Written Consent. Following
----------------------------------------
the completion by the Corporation of an IPO (as defined in the Certificate of
Incorporation), any action required or permitted to be taken by the stockholders
must be taken at a duly called and convened annual meeting or special meeting of
stockholders and cannot be taken by consent in writing.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. General Powers. The property, business and affairs of
--------------
the Corporation shall be managed by or under the direction of the Board.
Section 3.02. Number; Qualifications. The Board of Directors shall
----------------------
consist of one or more members. The number of the directors of the Board of the
Corporation shall be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies. Directors need not be
stockholders of the Corporation.
Section 3.03. Election of Directors. The directors shall be elected
---------------------
by the stockholders of the Corporation at each annual meeting of stockholders
or, prior to completion by the Corporation of an IPO, by written consent
pursuant to Section 2.11 hereof, and at each election the persons receiving the
greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating thereto,
including any provisions for a classified board or cumulative voting.
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<PAGE>
Unless the Board of Directors otherwise determines, vacancies resulting
from death, resignation, retirement, disqualification, removal from office or
other cause, and newly created directorships resulting from any increase in the
authorized number of directors, may be filled only by the affirmative vote of a
majority of the remaining directors, though less than a quorum of the Board of
Directors, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Board of Directors of the Corporation shall shorten
the term of any incumbent director.
Section 3.04. Resignations. Any director of the Corporation may
------------
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.05. Place of Meeting, Etc. The Board may hold any of its
----------------------
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special
meeting of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
Section 3.06. First Meeting. The Board shall meet as soon as
-------------
practicable after each annual election of directors and notice of such first
meeting shall not be required.
Section 3.07. Regular Meetings. Regular meetings of the Board shall
----------------
be held at such time and place as the Board shall from time to time by
resolution determine. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held, then the meeting shall be
held at the same hour and place
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on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
Section 3.08. Special Meetings. Special meetings of the Board may be
----------------
called by the Chairman of the Board of Directors, the Chief Executive Officer,
or the President and shall be called by the President or Secretary on the
written request of two directors. Notice of all special meetings of the Board
shall be given to each director at their address as it appears on the records of
the Corporation, as follows:
(a) by first-class mail, postage prepaid, deposited in the United
States mail in the city where the principal office of the Corporation is located
at least five (5) days before the date of such meeting; or
(b) by telegram, charges prepaid, such notice to be delivered to the
telegraph company in the city of the principal office of the Corporation at
least forty-eight (48) hours before the time of holding such meeting; or
(c) by personal delivery, or by telex, telecopy or other facsimile
transmission, at least twenty-four (24) hours prior to the time of holding such
meeting.
Such notice may be waived by any director and any meeting shall be a legal
meeting without notice having been given if all the directors shall be present
thereat or if those not present shall, either before or after the meeting, sign
a written waiver of notice of, or a consent to, such meeting or shall after the
meeting sign the approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or be made a part of the
minutes of the meeting.
Section 3.09. Quorum and Manner of Acting. Except as otherwise
---------------------------
provided in the Certificate of Incorporation or these Bylaws or by law, the
presence of a majority of the total number of directors then in office shall be
required to constitute a quorum for the transaction of business at any meeting
of the Board. Except as otherwise provided in the Certificate of Incorporation
or these Bylaws or by law, all matters shall be decided at any such meeting, a
quorum being present, by the affirmative votes of a majority of the directors
present. In the absence of a quorum, a majority of
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directors present at any meeting may adjourn the same from time to time until a
quorum shall be present. Notice of any adjourned meeting need not be given.
The directors shall act only as a Board, and the individual directors shall have
no power as such.
Section 3.10. Action by Consent. Any action required or permitted to
-----------------
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
Section 3.11. Compensation. The directors shall receive only such
------------
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of their attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
Section 3.12. Executive Committee. There may be an Executive
-------------------
Committee of two or more directors appointed by the Board, who may meet at
stated times, or pursuant to a notice to all by any of their own number, during
the intervals between the meetings of the Board; they shall advise and aid the
officers of the Corporation in all matters concerning its interest and the
management of its business, and generally perform such duties and exercise such
powers as may be directed or delegated by the Board from time to time. The
Board of Directors may also designate, if it desires, other directors as
alternate members who may replace any absent or disqualified member of the
Executive Committee at any meeting thereof. To the full extent permitted by
law, the Board may delegate to such committee authority to exercise all the
powers of the Board while the Board is not in session. Vacancies in the
membership of the committee shall be filled by the Board at a regular meeting or
at a special meeting for that purpose. In the absence or disqualification of
any member of the Executive Committee and any alternate member in such member's
place, the member or members of the Executive Committee present at the meeting
and not disqualified from voting, whether or not he or she
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or they constitute a quorum, may, by unanimous vote, appoint another member of
the Board of Directors to act at the meeting in the place of the absent or
disqualified member. The Executive Committee shall keep written minutes of its
meeting and report the same to the Board when required. The provisions of
Sections 3.07, 3.08, 3.09 and 3.10 of these Bylaws shall apply, mutatis
-------
mutandis, to any Executive Committee of the Board.
- --------
Section 3.13. Other Committees. The Board may, by resolution passed
----------------
by a majority of the whole Board, designate one or more other committees, each
such committee to consist of one or more of the directors of the Corporation.
The Board of Directors may also designate, if it desires, other directors as
alternate members who may replace any absent or disqualified member of any such
committee at any meeting thereof. To the full extent permitted by law, any such
committee shall have and may exercise such powers and authority as the Board may
designate in such resolution. Vacancies in the membership of a committee shall
be filled by the Board at a regular meeting or a special meeting for that
purpose. Any such committee shall keep written minutes of its meetings and
report the same to the Board when required. In the absence or disqualification
of any member of any such committee and any alternate member in such member's
place, the member or members of any such committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may, by unanimous vote, appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member. The
provisions of Sections 3.07, 3.08, 3.09 and 3.10 of these Bylaws shall apply,
mutatis mutandis, to any such committee of the Board.
- ------- --------
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the corporation shall be a
------
Chairman of the Board, a Chief Executive Officer, a President, a Chief Financial
Officer, and a Secretary. The Board may also elect one or more Vice Presidents
and Assistant Secretaries. A person may hold more than one office providing the
duties thereof can be consistently performed by the same person.
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Section 4.02. Other Officers. The Board may appoint such other
--------------
officers as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4.03. Election. Each of the officers of the Corporation,
--------
except such officers as may be appointed in accordance with the provisions of
Section 4.02 or Section 4.05 of this Article, shall be chosen annually by the
Board and shall hold their office until he or she shall resign or shall be
removed or otherwise disqualified to serve, or their successor shall be elected
and qualified.
Section 4.04. Salaries. The salaries of all executive officers of
--------
the Corporation shall be fixed by the Board or by such committee of the Board as
may be designated from time to time by a resolution adopted by a majority of the
Board.
Section 4.05. Removal; Vacancies. Subject to the express provisions
------------------
of a contract authorized by the Board, any officer may be removed, either with
or without cause, at any time by the Board or by any officer upon whom such
power of removal may be conferred by the Board. Any vacancy occurring in any
office of the Corporation shall be filled by the Board.
Section 4.06. The Chairman of the Board. The Chairman of the Board
-------------------------
shall preside at all meetings of the stockholders and directors and shall have
such other powers and duties as may be prescribed by the Board or by applicable
law. The Chairman shall be an ex-officio member of standing committees, if so
provided in the resolutions of the Board appointing the members of such
committees.
Section 4.07. Powers and Duties of Officers. The chief executive
-----------------------------
officer of the Corporation shall have such powers in the management of the
Corporation as may be prescribed in a resolution by the Board of Directors and,
to the extent not so provided, as generally pertain to such office. The chief
executive officer shall see that all orders and resolutions of the Board of
Directors are carried into effect.
The other officers of the Corporation shall have such powers and duties in
the management of the Corporation as may be prescribed in a resolution by the
Board of Directors or delegated to
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them by the chief executive officer and, to the extent not so provided or
delegated, as generally pertain to their respective offices, subject to the
control of the Board of Directors and the chief executive officer. Without
limiting the foregoing, the Secretary shall have the duty to record the
proceedings of the meetings of the stockholders and directors in a book to be
kept for that purpose.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 5.01. Checks, Drafts, Etc. All checks, drafts or other
--------------------
orders for payment of money, notes or other evidence of indebtedness payable by
the Corporation and all contracts or agreements shall be signed by such person
or persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person or persons shall give such bond, if
any, as the Board may require.
Section 5.02. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, the President, any
Vice President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
Section 5.03. General and Special Bank Accounts. The Board may from
---------------------------------
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
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special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01. Certificates for Stock. Every owner of stock of the
----------------------
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by such person. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
Chairman, or President or a Vice President, and by the Secretary or the
Treasurer, or any Assistant Secretary or Treasurer. Any or all of the
signatures on the certificates may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any such certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, such certificate
may nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue. A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
Section 6.02. Transfers of Stock. Transfers of shares of stock of
------------------
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by their attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 6.03, and upon surrender of
the
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certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
Section 6.03. Regulations. The Board may make such rules and
-----------
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
Section 6.04. Lost, Stolen, Destroyed, and Mutilated Certificates.
---------------------------------------------------
In any case of loss, theft, destruction or mutilation of any certificate of
stock, another may be issued in its place upon proof of such loss, theft,
destruction or mutilation and upon the giving of a bond of indemnity to the
Corporation in such form and in such sum as the Board may direct; provided,
however, that a new certificate may be issued without requiring any bond when,
in the judgment of the Board, it is proper so to do.
Section 6.05. Fixing Date for Determination of Stockholders of
------------------------------------------------
Record. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action except, prior to completion by the
Corporation of an IPO, for consenting to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which shall not precede
the date the resolution fixing the record date is adopted and which record date
shall not be more than 60 nor less than 10 days before the date of any meeting
of stockholders, nor more than 60 days prior to the time for such other action
as herein before described; provided, however, that if no record date is fixed
by the Board of Directors, the record date for
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determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day preceding the day on
which notice is given or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held and, for determining
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or to exercise any rights in respect of any change,
conversion or exchange of stock or any other lawful action except, prior to
completion by the Corporation of an IPO, for consenting to corporate action in
writing without a meeting, the record date shall be the close of business on the
day on which the Board of Directors adopts a resolution relating thereto.
For purposes of determining the stockholders entitled, prior to completion
by the Corporation of an IPO, to consent to corporate action in writing without
a meeting, the Board of Directors may fix a record date, which shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than 10 days after
the date upon which the resolution fixing the record date is adopted, as of
which shall be determined the stockholders of record entitled to consent to
corporate action in writing without a meeting. If no record date has been fixed
by the Board of Directors and no prior action by the Board of Directors is
required by the Delaware General Corporation Law, the record date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by the Delaware General Corporation Law with respect to the proposed
action, the record date for determining stockholders entitled to consent to
corporate action in writing shall be the close of business on the day in which
the Board of Directors adopts the resolutions taking such prior action.
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ARTICLE VII
INDEMNIFICATION
Section 7.01. Indemnification of Officers, Directors, Employees and
-----------------------------------------------------
Agents; Insurance.
- -----------------
(a) Right to Indemnification. The Corporation shall have the right to
------------------------
indemnify any person (the "Indemnitee") to the fullest extent permitted by law
if Indemnitee was or is or becomes a party to or witness or other participant
in, or is threatened to be made a party to or witness or other participant in,
any threatened, pending or completed action, suit, proceeding or alternative
dispute resolution mechanism, or any hearing, inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other (hereinafter a "Claim")
by reason of (or arising in part out of) any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Corporation, or any subsidiary of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, agent or
fiduciary of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise, or by reason of any action or inaction on
the part of Indemnitee while serving in such capacity against any and all
expenses (including attorneys' fees and all other costs, expenses, and
obligations incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in, any such action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Corporation, which approval shall not be unreasonably
withheld) of such Claim and any federal, state, local or foreign taxes imposed
on the Indemnitee as a result of the actual or deemed receipt of any payments
under this Agreement (collectively, hereinafter "Expenses"), including all
interest assessments and other charges paid or payable in connection with or in
respect of such Expenses.
(b) Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation,
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<PAGE>
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law, provided that such insurance is available on acceptable
--------
terms, which determination shall be made by the Board of Directors or by a
committee thereof.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Seal. The Board shall provide a corporate seal, which
----
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
Section 8.02. Waiver of Notices. Whenever notice is required to be
-----------------
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
Section 8.03. Fiscal Year. The fiscal year of the Corporation shall
-----------
be fixed by resolution of the Board.
Section 8.04. Voting Stock. Any person so authorized by the Board,
------------
and in the absence of such authorization, the Chairman of the Board, the
President or any Vice President, shall have full power and authority on behalf
of the Corporation to attend and to act and vote at any meeting of the
stockholders of any corporation in which the Corporation may hold stock and at
any such meeting shall possess and may exercise any and all rights and powers
which are incident to the ownership of such stock and which as the owner thereof
the Corporation might have possessed and exercised if present. The Board by
resolution from time to time may confer like powers upon any other person or
persons.
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<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, the duly elected Assistant Secretary of United
Road Services, Inc., a Delaware corporation, do hereby certify:
That the within and foregoing Amended and Restated Bylaws were adopted
as the Bylaws of the corporation by the Board of Directors on February ____,
1998 and the same do now constitute the Bylaws of said corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my
name this ______ day of February, 1998.
--------------------------------
Ross Berner, Assistant Secretary
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<PAGE>
EXHIBIT 10.1
United Road Services, Inc.
1998 Stock Option Plan
1. Adoption and Purpose of the Plan. This stock option plan, to be known as the
--------------------------------
"United Road Services, Inc. 1998 Stock Option Plan" (but referred to herein as
the "Plan") has been adopted by the board of directors (the "Board") of United
Road Services, Inc., a Delaware corporation (the "Company"), and is subject to
the approval of its shareholders pursuant to section 7 below. The purpose of
this Plan is to advance the interests of the Company and its shareholders by
enabling the Company to attract and retain qualified directors, officers,
employees, independent contractors, consultants and advisers by providing them
with an opportunity for investment in the Company. The options that may be
granted hereunder ("Options") represent the right by the grantee thereof (each,
including any permitted transferee, an "Optionee") to acquire shares of the
Company's common stock ("Shares," which if acquired pursuant to the exercise of
an Option will be referred to as "Option Shares") subject to the terms and
conditions of this Plan and a written agreement between the Company and the
Optionee to evidence each such Option (an "Option Agreement").
2. Certain Definitions. The defined terms set forth in Exhibit A attached
-------------------
hereto and incorporated herein (together with other capitalized terms defined
elsewhere in this Plan) will govern the interpretation of this Plan.
3. Eligibility. The Company may grant Options under this Plan only to (i)
-----------
persons who, at the time of such grant, are directors, officers and/or employees
of the Company and/or any of its Subsidiaries, and (ii) persons who, and
entities which, at the time of such grant, are independent contractors,
consultants or advisers of the Company and/or any of its Subsidiaries
(collectively, "Eligible Participants"). No person or entity will be an Eligible
Participant following his, her or its Termination of Eligibility Status and no
Option may be granted to any person or entity other than an Eligible
Participant. There is no limitation on the number of Options that may be granted
to an Eligible Participant.
4. Option Pool; Shares Reserved for Options. In no event will the Company
-----------
issue, in the aggregate, a number of shares equal to more than ten percent (10%)
of the number of Shares outstanding immediately following the consummation of
the Company's Initial Public Offering (the "Option Pool") pursuant to the
exercise of all Options granted under this Plan, exclusive of those Option
Shares that may be reacquired by the Company by repurchase or otherwise. At all
times while Options granted under this Plan are outstanding, the Company will
reserve for issuance for the purposes
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<PAGE>
hereof a sufficient number of authorized and unissued Shares to fully satisfy
the Company's obligations under all such outstanding Options.
5. Administration. This Plan will be administered and interpreted by the Board,
--------------
or by a committee consisting of two or more members of the Board, appointed by
the Board for such purpose (the Board, or such committee, referred to herein as
the "Administrator"). Subject to the express terms and conditions hereof, the
Administrator is authorized to prescribe, amend and rescind rules and
regulations relating to this Plan, and to make all other determinations
necessary or advisable for its administration and interpretation. Specifically,
the Administrator will have full and final authority in its discretion, subject
to the specific limitations on that discretion as are set forth herein and in
the Articles of Incorporation and Bylaws of the Company, at any time:
(a) to select and approve the Eligible Participants to whom Options will
be granted from time to time hereunder;
(b) to determine the Fair Market Value of the Shares as of the Grant
Date for any Option that is granted hereunder;
(c) with respect to each Option it decides to grant, to determine the
terms and conditions of that Option, to be set forth in the Option Agreement
evidencing that Option (the form of which also being subject to approval by
the Administrator), which may vary from the "default" terms and conditions
set forth in section 6 below, except to the extent otherwise provided in
this Plan, including, without limitation, as follows:
(i) the total number of Option Shares that may be acquired by the
Optionee pursuant to the Option;
(ii) if the Option satisfies the conditions under Section 422(b) of
the Code, whether the Option will be treated as an ISO;
(iii) the per share purchase price to be paid to the Company by the
Optionee to acquire the Option Shares issuable upon exercise of the
Option (the "Option Price");
(iv) the maximum period or term during which the Option will be
exercisable (the "Option Term");
(v) the maximum period following any Termination of Eligibility
Status, whether resulting from an Optionee's death, disability or any
other reason, during which period (the "Grace
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<PAGE>
Period") the Option will be exercisable, subject to Vesting and to the
expiration of the Option Term;
(vi) whether to accept a promissory note or other form of legal
consideration in addition to cash as payment of all or a portion of the
Option Price and/or Tax Withholding Liability to be paid by the Optionee
upon the exercise of an Option granted hereunder;
(vii) the conditions (e.g., the passage of time or the occurrence of
events), if any, that must be satisfied prior to the vesting of the
right to exercise all or specified portions of an Option (such portions
being described as the number of Option Shares, or the percentage of the
total number of Option Shares that may be acquired by the Optionee
pursuant to the Option; the vested portion being referred to as a
"Vested Option" and the unvested portion being referred to as an
"Unvested Option"); and
(d) to delegate all or a portion of the Administrator's authority under
sections 5(a), (b) and (c) above to one or more members of the Board who
also are executive officers of the Company, and subject to such restrictions
and limitations as the Administrator may decide to impose on such
delegation.
6. Default Terms and Conditions of Option Agreements. Unless otherwise
-------------------------------------------------
expressly provided in an Option Agreement based on the Administrator's
determination pursuant to section 5(c) above, the following terms and conditions
will be deemed to apply to each Option as if expressly set forth in the Option
Agreement:
6.1 ISO. No Option will be treated as an ISO unless treatment as an ISO is
---
expressly provided for in an Option Agreement and such Option satisfies the
conditions of Section 422(b) of the Code.
6.2 Option Term. The Option Term will be for a period of 10 years beginning
-----------
on the Grant Date (or 5 years in the case of an ISO granted to a 10%
shareholder).
6.3 Grace Periods. Following a Termination of Eligibility Status:
-------------
(a) Unless the Termination of Eligibility Status is a result of a
Termination for Cause, that portion of the Option that is a Vested Option
will be exercisable at any time prior to the expiration of the Option Term;
and
(b) the Option will terminate, and there will be no Grace Period,
effective immediately as of the date and time of a Termination for
-3-
<PAGE>
Cause of the Optionee, regardless of whether the Option is Vested or
Unvested.
6.4 Vesting. The Option initially will be deemed an entirely Unvested
-------
Option, but portions of the Option will become a Vested Option on the following
schedule:
(a) thirty-three and one-third percent (33-1/3%) will become a Vested
Option as of the first anniversary of the "Vesting Start Date" specified in
the Option Agreement (which may be earlier but may not be later than the
Grant Date specified therein); and
(b) thirty-three and one-third percent (33-1/3%) of the Option will
become a Vested Option as of each anniversary thereafter;
provided that the Optionee does not suffer a Termination of Eligibility Status
prior to each such vesting date and provided further that additional vesting
will be suspended during any period while the Optionee is on a leave of absence
from the Company or its Subsidiaries, as determined by the Administrator.
6.5 Exercise of the Option; Issuance of Share Certificate.
-----------------------------------------------------
(a) The portion of the Option that is a Vested Option may be exercised
by giving written notice thereof to the Company, on such form as may be
specified by the Administrator, but in any event stating: the Optionee's
intention to exercise the Option; the date of exercise; the number of full
Option Shares to be purchased; the amount and form of payment of the Option
Price; and such assurances of the Optionee's investment intent as the Company
may require to ensure that the transaction complies in all respects with the
requirements of the 1933 Act and other applicable securities laws. The notice of
exercise will be signed by the person or persons exercising the Option. In the
event that the Option is being exercised by the representative of the Optionee,
the notice will be accompanied by proof satisfactory to the Company of the
representative's right to exercise the Option. The Option may be exercised by a
securities broker acting on behalf of the Optionee pursuant to authorization
instructions approved by the Company. The notice of exercise will be accompanied
by full payment of the Option Price for the number of Option Shares to be
purchased, in United States dollars, in cash, by check made payable to the
Company, or by delivery of such other form of payment (if any) as approved by
the Administrator. Payment may also be made by delivering a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds sufficient to pay the Option Price and, if required, the amount
of any Tax Withholding Liability.
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<PAGE>
(b) To the extent required by applicable federal, state, local or
foreign law, and as a condition to the Company's obligation to issue any Shares
upon the exercise of the Option in full or in part, the Optionee will make
arrangements satisfactory to the Company for the payment of any applicable Tax
Withholding Liability that may arise by reason of or in connection with such
exercise. Such arrangements may include, in the Company's sole discretion, that
the Optionee tender to the Company the amount of such Tax Withholding Liability,
in cash, by check made payable to the Company, by delivery of irrevocable
instructions to a broker as described in the last sentence of section (a) above,
or in the form of such other payment as may be approved by the Administrator, in
its discretion pursuant to section 5(c)(vi) above.
(c) After receiving a proper notice of exercise and payment of the
applicable Option Price and Tax Withholding Liability, the Company will cause to
be issued a certificate or certificates for the Option Shares as to which the
Option has been exercised, registered in the name of the person rightfully
exercising the Option and the Company will cause such certificate or
certificates to be delivered to such person.
6.6 Compliance with Law. Notwithstanding any other provision of this Plan,
-------------------
Options may be granted pursuant to this Plan, and Option Shares may be issued
pursuant to the exercise thereof by an Optionee, only after and on the condition
that there has been compliance with all applicable federal and state securities
laws. The Company will not be required to list, register or qualify any Option
Shares upon any securities exchange, under any applicable state, federal or
foreign law or regulation, or with the Securities and Exchange Commission or any
state agency, or secure the consent or approval of any governmental regulatory
authority, except that if at any time the Board determines, in its discretion,
that such listing, registration or qualification of the Option Shares, or any
such consent or approval, is necessary or desirable as a condition of or in
connection with the exercise of an Option and the purchase of Option Shares
thereunder, that Option may not be exercised, in whole or in part, unless and
until such listing, registration, qualification, consent or approval is effected
or obtained free of any conditions that are not acceptable to the Board, in its
discretion. However, the Company will seek to register or qualify with, or as
may be provided by applicable local law, file for and secure an exemption from
such registration or qualification requirements from, the applicable securities
administrator and other officials of each jurisdiction in which an Eligible
Participant would be granted an Option hereunder prior to such grant.
6.7 Restrictions on Transfer.
------------------------
(a) Options Nontransferable. No Option will be transferable by an
-----------------------
Optionee otherwise than by will or the laws of descent and distribution.
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<PAGE>
During the lifetime of a natural person who is granted an Option under this
Plan, the Option will be exercisable only by him or her. Notwithstanding
anything else in this Plan to the contrary, no Option Agreement will contain any
provision which is contrary to, or which modifies, the provisions of this
section 6.7(a).
(b) Prohibited Transfers. Prior to the Initial Public Offering, no
--------------------
Holder of any Option Shares may Transfer such Shares, or any interest therein:
(i) except as expressly provided in this Plan; and (ii) in full compliance with
all applicable securities laws and any applicable restrictions on Transfer
provided in the Company's Articles of Incorporation and/or Bylaws, which will be
deemed incorporated by reference into this Plan. All Transfers of Option Shares
not complying with the specific limitations and conditions set forth in this
section 6.7 are expressly prohibited. Any prohibited Transfer is void and of no
effect, and no purported transferee in connection therewith will be recognized
as a Holder of Option Shares for any purpose whatsoever. Should such a Transfer
purport to occur, the Company may refuse to carry out the Transfer on its books,
attempt to set aside the Transfer, enforce any undertakings or rights under this
Plan, or exercise any other legal or equitable remedy.
(c) Conditions to Transfer. It will be a condition to any Transfer of
----------------------
any Option Shares that:
(i) the transferee of the Shares will execute such documents as the
Company may reasonably require to ensure that the Company's rights under
this Plan, and any applicable Option Agreement, are adequately protected
with respect to such Shares, including, without limitation, the transferee's
agreement to be bound by all of the terms and conditions of this Plan and
such Agreement, as if he or she were the original Holder of such Shares; and
(ii) the Company is satisfied that such Transfer complies in all
respects with the requirements imposed by applicable state and federal
securities laws and regulations.
(d) Market Standoff. If in connection with any public offering of
---------------
securities of the Company (or any Successor Entity), the underwriter or
underwriters managing such offering so requests, then each Optionee and each
Holder of Option Shares will agree to not sell or otherwise Transfer any such
Shares (other than Shares included in such underwriting) without the prior
written consent of such underwriter, for such period of time as may be requested
by the underwriter commencing on the effective date of the registration
statement filed with the Securities and Exchange Commission in connection with
such offering.
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<PAGE>
6.8 Change of Control Transactions. Except as otherwise provided in the
------------------------------
Option Agreement, or any contract of employment or engagement between Optionee
and the Company, in the event of a Change of Control Transaction, the Company
shall endeavor to cause the Successor Entity in such transaction either to
assume all of the Options which have been granted hereunder and which are
outstanding as of the consummation of such transaction ("Closing"), or to issue
(or cause to be issued) in substitution thereof comparable options of such
Successor Entity (or of its parent or its Subsidiary). If the Successor Entity
is unwilling to either assume such Options or grant comparable options in
substitution for such Options, on terms that are acceptable to the Company as
determined by the Board in the exercise of its discretion, then with respect to
each outstanding Option, that portion of the Option which remains Unvested will
become Vested immediately prior to such Closing; and the Board may cancel all
outstanding Options, and terminate this Plan, effective as of the Closing,
provided that it will notify all Optionees of the proposed Change of Control
Transaction a reasonable amount of time prior to the Closing so that each
Optionee will be given the opportunity to exercise the Vested portion of his or
her Option (after giving effect to the acceleration of such vesting discussed
above) prior to the Closing. For purposes of this section 6.8, the term "Change
of Control Transaction" means (a) the sale of all or substantially all of the
assets of the Company to any person or entity that, prior to such sale, did not
control, was not under common control with, or was not controlled by, the
Company, or (b) a merger or consolidation or other reorganization in which the
Company is not the surviving entity or becomes owned entirely by another entity,
unless at least fifty percent (50%) of the outstanding voting securities of the
surviving or parent corporation, as the case may be, immediately following such
transaction are beneficially held by such persons and entities in the same
proportion as such persons and entities beneficially held the outstanding voting
securities of the Company immediately prior to such transaction, or (c) the sale
or other change of beneficial ownership of at least fifty percent (50%) of the
outstanding voting securities of the Company to any person or "group" as that
term is defined under the Securities Exchange Act of 1934, as amended; provided
that the issuances of shares to the stockholders of the founding companies
consolidating with the Company at the time of the Initial Public Offering, and
the issuances of shares in the Initial Public Offering, shall in no event
constitute a Change of Control Transaction.
6.9 Additional Restrictions on Transfer; Investment Intent. By accepting an
-----------------------------------
Option and/or Option Shares under this Plan, the Optionee will be deemed to
represent, warrant and agree that, unless a registration statement is in effect
with respect to the offer and sale of Option Shares: (i) neither the Option nor
any such Shares will be freely tradeable and must be held indefinitely unless
such Option and such Shares are either registered under the 1933 Act or an
exemption from such registration is available;
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<PAGE>
(ii) the Company is under no obligation to register the Option or any such
Shares; (iii) upon exercise of the Option, the Optionee will purchase the Option
Shares for his or her own account and not with a view to distribution within the
meaning of the 1933 Act, other than as may be effected in compliance with the
1933 Act and the rules and regulations promulgated thereunder; (iv) no one else
will have any beneficial interest in the Option Shares; (v) the Optionee has no
present intention of disposing of the Option Shares at any particular time; and
(vi) neither the Option nor the Shares have been qualified under the securities
laws of any state and may only be offered and sold pursuant to an exception from
qualification under applicable state securities laws.
6.10 Stock Certificates; Legends. Certificates representing Option Shares
---------------------------
will bear all legends required by law and necessary or appropriate in the
Administrator's discretion to effectuate the provisions of this Plan and of the
applicable Option Agreement. The Company may place a "stop transfer" order
against Option Shares until full compliance with all restrictions and conditions
set forth in this Plan, in any applicable Option Agreement and in the legends
referred to in this section 6.10.
6.11 Notices. Any notice to be given to the Company under the terms of an
-------
Option Agreement will be addressed to the Company at its principal executive
office, Attention: Secretary, or at such other address as the Company may
designate in writing. Any notice to be given to an Optionee will be addressed to
him or her at the address provided to the Company by the Optionee. Any such
notice will be deemed to have been duly given if and when enclosed in a properly
sealed envelope, addressed as aforesaid, deposited, postage prepaid, in a post
office or branch post office regularly maintained by the local postal authority.
6.12 Other Provisions. Each Option Agreement may contain such other terms,
----------------
provisions and conditions, including restrictions on the Transfer of Option
Shares, and rights of the Company to repurchase such Shares, not inconsistent
with this Plan and applicable law, as may be determined by the Administrator in
its sole discretion.
6.13 Specific Performance. Under those circumstances in which the Company
--------------------
chooses to timely exercise its rights to repurchase Option Shares as provided
herein or in any Option Agreement, the Company will be entitled to receive such
Shares in specie in order to have the same available for future issuance without
dilution of the holdings of other shareholders of the Company. By accepting
Option Shares, the Holder thereof therefore acknowledges and agrees that money
damages will be inadequate to compensate the Company and its shareholders if
such a repurchase is not completed as contemplated hereunder and that the
Company will, in such case, be entitled to a decree of specific performance of
the terms hereof or
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<PAGE>
to an injunction restraining such holder (or such Holder's personal
representative) from violating this Plan or Option Agreement, in addition to any
other remedies that may be available to the Company at law or in equity.
7. Term of the Plan. This Plan will become effective on the date of its
----------------
adoption by the Board. This Plan will expire on the tenth (10th) anniversary of
the date of its adoption by the Board or its approval by the shareholders of the
Company, whichever is earlier, unless it is terminated earlier pursuant to
section 11 of this Plan, after which no more Options may be granted under this
Plan, although all outstanding Options granted prior to such expiration or
termination will remain subject to the provisions of this Plan, and no such
expiration or termination of this Plan will result in the expiration or
termination of any such Option prior to the expiration or early termination of
the applicable Option Term.
8. Adjustments Upon Changes in Stock. In the event of any change in the
---------------------------------
outstanding Shares of the Company from and after consummation of the Company's
Initial Public Offering as a result of a stock split, reverse stock split, stock
bonus or distribution, recapitalization, combination or reclassification,
appropriate proportionate adjustments will be made in: (i) the aggregate number
of Shares that are reserved for issuance in the Option Pool pursuant to section
4 above, under outstanding Options or future Options granted hereunder; (ii) the
Option Price and the number of Option Shares that may be acquired under each
outstanding Option granted hereunder; and (iii) other rights and matters
determined on a per share basis under this Plan or any Option Agreement
evidencing an outstanding Option granted hereunder. Any such adjustments will be
made only by the Board, and when so made will be effective, conclusive and
binding for all purposes with respect to this Plan and all Options then
outstanding. No such adjustments will be required by reason of the issuance or
sale by the Company for cash or other consideration of additional Shares or
securities convertible into or exchangeable for Shares.
9. Modification, Extension and Renewal of Options. Subject to the terms and
----------------------------------------------
conditions and within the limitations of this Plan, the Administrator may
modify, extend or renew outstanding Options granted under this Plan, or accept
the surrender of outstanding Options (to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised). Notwithstanding the foregoing, however, no
modification of any Option will, without the consent of the Optionee, alter or
impair any rights or obligations under any outstanding Option.
10. Governing Law. The internal laws of the State of New York (irrespective of
-------------
its choice of law principles) will govern the validity of this
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<PAGE>
Plan, the construction of its terms and the interpretation of the rights and
duties of the parties hereunder and under any Option Agreement.
11. Amendment and Discontinuance. The Board may amend, suspend or discontinue
----------------------------
this Plan at any time or from time to time; provided that no action of the Board
will, without the approval of the shareholders of the Company, materially
increase (other than by reason of an adjustment pursuant to section 8 hereof)
the maximum aggregate number of Option Shares in the Option Pool, materially
increase the benefits accruing to Eligible Participants, or materially modify
the category of, or eligibility requirements for persons who are Eligible
Participants. However, no such action may alter or impair any Option previously
granted under this Plan without the consent of the Optionee, nor may the number
of Option Shares in the Option Pool be reduced to a number that is less than the
aggregate number of Option Shares (i) that may be issued pursuant to the
exercise of all outstanding and unexpired Options granted hereunder, and (ii)
that have been issued and are outstanding pursuant to the exercise of Options
granted hereunder.
12. No Shareholder Rights. No rights or privileges of a shareholder in the
---------------------
Company are conferred by reason of the granting of an Option. No Optionee will
become a shareholder in the Company with respect to any Option Shares unless and
until the Option has been properly exercised and the Option Price fully paid as
to the portion of the Option exercised.
13. Copies of Plan. A copy of this Plan will be delivered to each Optionee at
--------------
or before the time he, she or it executes an Option Agreement.
Date Plan Adopted by Board of Directors:_____________________, 199__
Date Plan Approved by the Shareholders:_____________________, 199__
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United Road Services, Inc.
1998 Stock Option Plan
Exhibit A
Definitions
-----------
1. "10% shareholder" means a person who owns, either directly or indirectly by
virtue of the ownership attribution provisions set forth in Section 424(d) of
the Code at the time he or she is granted an Option, stock possessing more than
10% of the total combined voting power or value of all classes of stock of the
Company and/or of its Subsidiaries.
2. "1933 Act" means the Securities Act of 1933, as amended.
3. "Administrator" has the meaning set forth in section 5 of the Plan.
4. "Board" has the meaning set forth in section 1 of the Plan.
5. "Business Combination" has the meaning set forth in section 6.8 of the Plan.
6. "Change of Control Transaction" has the meaning set forth in section 6.8 of
the Plan.
7. "Closing" has the meaning set forth in section 6.8 of the Plan.
8. "Code" means the Internal Revenue Code of 1986, as amended (references
herein to Sections of the Code are intended to refer to Sections of the Code as
enacted at the time of the Plan's adoption by the Board and as subsequently
amended, or to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise).
9. "Company" has the meaning set forth in section 1 of the Plan.
10. "disability" means any physical or mental disability which results in a
Termination of Eligibility Status under applicable law, except that for purposes
of section 6.1(c) of the Plan, the term "disability" means permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
11. "Donative Transfer" with respect to Option Shares means any voluntary
Transfer by a transferor other than for value or the payment of consideration to
the transferor.
12. "Eligible Participants" has the meaning set forth in section 3 of the Plan.
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<PAGE>
13. "Fair Market Value" means, with respect to the Shares and as of the date
that is relevant to such a determination (e.g., on the Grant Date), the market
price per share of such Shares determined by the Administrator, consistent with
the requirements of Section 422 of the Code and to the extent consistent
therewith, as follows: (a) if the Shares are traded on a stock exchange on the
date in question, then the Fair Market Value will be equal to the closing price
reported by the applicable composite-transactions report for such date; (b) if
the Shares are traded over-the-counter on the date in question and are
classified as a national market issue, then the Fair Market Value will be equal
to the last-transaction price quoted by the NASDAQ system for such date; (c) if
the Shares are traded over-the-counter on the date in question but are not
classified as a national market issue, then the Fair Market Value will be equal
to the mean between the last reported representative bid and asked prices quoted
by the NASDAQ system for such date; and (d) if none of the foregoing provisions
is applicable, then the Fair Market Value will be determined by the
Administrator in good faith on such basis as it deems appropriate.
14. "Grace Period" has the meaning set forth in section 5(c)(v) of the Plan.
15. "Grant Date" means, with respect to an Option, the date on which the Option
Agreement evidencing that Option is entered into between the Company and the
Optionee, or such other date as may be set forth in that Option Agreement as the
"Grant Date" which will be the effective date of that Option Agreement.
16. "Holder" means the holder of any Option Shares.
17. "Initial Public Offering" means the closing of the first sale of securities
of the Company, or of any Successor Entity, to the public, through a firm
commitment underwriting, pursuant to an effective registration statement filed
with the Securities and Exchange Commission under the 1933 Act.
18. "Involuntary Transfer" with respect to Option Shares includes, without
limitation, any of the following: (A) an assignment of the Shares for the
benefit of creditors of the transferor; (B) a Transfer by operation of law; (C)
an execution of judgment against the Shares or the acquisition of record or
beneficial ownership of Shares by a lender or creditor; (D) a Transfer pursuant
to any decree of divorce, dissolution or separate maintenance, any property
settlement, any separation agreement or any other agreement with a spouse
(except for bona fide estate planning purposes) under which any Shares are
Transferred or awarded to the spouse of the transferor or are required to be
sold; or (E) a Transfer resulting from the filing by the transferor of a
petition for relief, or the filing of an involuntary petition against the
transferor, under the bankruptcy laws of the United States or of any other
nation.
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<PAGE>
19. "ISO" means an "incentive stock option" as defined in Section 422 of the
Code.
20. "Option Agreement" has the meaning set forth in section 1 of the Plan.
21. "Option Pool" has the meaning set forth in section 4 of the Plan.
22. "Option Price" has the meaning set forth in section 5(c)(iii) of the Plan.
23. "Option Shares" has the meaning set forth in section 1 of the Plan, provided
that for purposes of section 6.7 of the Plan, the term "Option Shares" includes
all Shares issued by the Company to a Holder (or his, her or its predecessor) by
reason of such holdings, including any securities which may be acquired as a
result of a stock split, stock dividend, and other distributions of Shares in
the Company made upon, or in exchange for, other securities of the Company.
24. "Option Term" has the meaning set forth in section 5(c)(iv) of the Plan.
25. "Optionee" has the meaning set forth in section 1 of the Plan.
26. "Options" has the meaning set forth in section 1 of the Plan.
27. "Plan" has the meaning set forth in section 1 of the Plan.
28. "Shares" has the meaning set forth in section 1 of the Plan.
29. "Subsidiary" has the same meaning as "subsidiary corporation" as defined in
Section 424(f) of the Code.
30. "Successor Entity" means a corporation or other entity that acquires all or
substantially all of the assets of the Company, or which is the surviving or
parent entity resulting from a Business Combination, as that term is defined in
section 6.8 of the Plan.
31. "Tax Withholding Liability" in connection with the exercise of any Option
means all federal and state income taxes, social security tax, and any other
taxes applicable to the compensation income arising from the transaction
required by applicable law to be withheld by the Company.
32. "Termination of Eligibility Status" means (i) in the case of any employee of
the Company and/or any of its Subsidiaries, a termination of his or her
employment, whether by the employee or employer, and whether voluntary or
involuntary, including without limitation as a result of the death or disability
of the employee, (ii) in the case of any advisor, consultant, or independent
contractor of the Company and/or any of its Subsidiaries,
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<PAGE>
the termination of the services relationship pursuant to any contract between
the parties or otherwise under applicable law, and (iii) in the case of any
director of the Company and/or any of its Subsidiaries, the death of or
resignation by the director or his or her removal from the board in the manner
provided by the articles of incorporation, bylaws or other organic instruments
of the Company or Subsidiary or otherwise in accordance with applicable law.
33. "Termination for Cause" means (i) in the case of an Optionee who is an
employee of the Company and/or any of its Subsidiaries, a termination by the
employer of the Optionee's employment for "cause" as defined by any applicable
contract of employment, or if not defined therein (or following termination of
any such contract of employment), pursuant to the "For Cause Standard" set forth
below, (ii) in the case of an Optionee who is or which is an advisor, consultant
or independent contractor to the Company and/or any of its Subsidiaries, a
termination of the services relationship by the hiring party for "cause" or
breach of contract, as defined by any applicable contract of engagement between
the parties, or if not defined therein (or following termination of any such
contract of engagement), pursuant to the "For Cause Standard" set forth below,
and (iii) in the case of an Optionee who is a director, but not an employee, of
the Company, removal of him or her from the board of directors by action of the
shareholders or, if permitted by applicable law and the articles, bylaws or
other organic documents of the Company, by the other directors, in connection
with the good faith determination of the board of directors (or of the Company's
shareholders if so required, but in either case excluding the vote of the
subject individual if he or she is a director or a shareholder) that the "For
Cause Standard" set forth below has been satisfied. For purposes hereof, the
"For Cause Standard" means that one or more of the following has occurred: (a)
the commission by Optionee of any act materially detrimental to the Company,
including fraud, embezzlement, theft, bad faith, gross negligence, recklessness
or willful misconduct; (b) incompetence or repeated failure or refusal to
perform the duties required of Optionee by the Company; (c) conviction of a
felony or of any crime of moral turpitude to the extent materially detrimental
to the Company; or (d) any material misrepresentation by Optionee to the Company
regarding the operation of the business, provided that the action or conduct
described in clause (b) above will constitute "Cause" only if such action or
conduct continues after the Company has provided Optionee with written notice
thereof and a reasonable opportunity (to be not less than 30 days) to cure the
same.
34. "Transfer" with respect to Option Shares, includes, without limitation, a
voluntary or involuntary sale, assignment, transfer, conveyance, pledge,
hypothecation, encumbrance, disposal, loan, gift, attachment or levy of those
Shares, including any Involuntary Transfer, Donative Transfer or transfer by
will or under the laws of descent and distribution.
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<PAGE>
35. "Unvested Option" has the meaning set forth in section 5(c)(vii) of the
Plan.
36. "Unvested Shares" has the meaning set forth in section 5(c)(viii) of the
Plan.
37. "Vested Option" has the meaning set forth in section 5(c)(vii) of the Plan.
38. "Vested Shares" has the meaning set forth in section 5(c)(viii) of the
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<PAGE>
EXHIBIT 10.2
STOCK PURCHASE AND RESTRICTION AGREEMENT
----------------------------------------
This Stock Purchase and Restriction Agreement ("AGREEMENT") is made and
entered into effective as of November __, 1997 (the "EFFECTIVE DATE"), by and
between Towing America, Inc., a Delaware corporation (the "COMPANY"), and Edward
T. Sheehan ("PURCHASER").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase of Restricted Shares. Subject to the terms and conditions of this
-----------------------------
Agreement, Purchaser agrees to purchase from the Company and the Company agrees
to sell to Purchaser, at the per share price of ten dollars per share ($10.00),
a total of two thousand (2,000) shares of Common Stock of the Company (the
"RESTRICTED SHARES"), for an aggregate purchase price of twenty thousand dollars
($20,000.00) (the "PURCHASE PRICE"). The purchase of the Restricted Shares by
Purchaser will take place at the principal offices of the Company on November
__, 1997 or such other time and place as may be mutually agreed upon by
Purchaser (which time and place are designated the "CLOSING"). The Company will
deliver to Purchaser as soon as practicable following the Closing one or more
certificate(s) representing his Restricted Shares, against delivery to the
Company by Purchaser at the Closing of cash in the form of a check or funds
reasonably acceptable to the Company in the aggregate amount of the Purchase
Price. The Restricted Shares, when issued, will be duly and validly issued,
fully paid and nonassessable. The Company will place legends on the
certificates represented by the Restricted Shares as required by applicable
securities laws, including a legend in form substantially as follows:
THESE SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
WITH ANY STATE SECURITIES ADMINISTRATOR UNDER ANY STATE SECURITIES OR BLUE
SKY LAW. THE SALE OR OTHER DISPOSITION OF THESE SHARES IS RESTRICTED AND
TRANSFER OF THESE SHARES IS PROHIBITED UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
TRANSFER, SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATES SECURITIES
OR BLUE SKY LAW. BY ACQUIRING THESE SHARES OF COMMON STOCK, EACH HOLDER
REPRESENTS THAT HE HAS ACQUIRED THE SAME FOR INVESTMENT AND THAT HE WILL NOT
SELL OR OTHERWISE DISPOSE OF THESE SHARES OF COMMON STOCK
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<PAGE>
WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH THE AFORESAID ACT AND ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAW AND THE RULES AND REGULATIONS
THEREUNDER. SAID SHARES ARE SUBJECT TO CERTAIN REPURCHASE RIGHTS IN THE
COMPANY AS DESCRIBED IN A STOCK PURCHASE AND RESTRICTION AGREEMENT, A COPY
OF WHICH MAY BE OBTAINED FROM THE COMPANY.
2. Vesting; Company Right to Repurchase Unvested Shares.
----------------------------------------------------
2.1 Vesting of Restricted Shares. As of the Effective Date, all of
----------------------------
Purchaser's Restricted Shares will be deemed "UNVESTED." Such Restricted Shares
will be deemed "VESTED" as follows: (a) one thousand (1,000) of Purchaser's
Restricted Shares will be become Vested as of the consummation of the Company's
first firm commitment underwritten offering of its securities pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"INITIAL PUBLIC OFFERING") and (b) the remaining one thousand (1,000) of
Purchaser's Restricted Shares will become Vested as of the completion of the
initial 18-month period of Purchaser's employment with the Company, which period
shall commence immediately upon the Company's filing of a Registration Statement
with the Securities and Exchange Commission in connection with such Initial
Public Offering. Although all of the Restricted Shares (whether Vested or
Unvested) will entitle Purchaser to all of the rights accorded to holders of
Common Stock of the Company, those Restricted Shares that are Unvested remain
subject to repurchase by the Company pursuant to section 2.2 below.
2.2 Company Right to Repurchase Unvested Shares. In the event that
-------------------------------------------
Purchaser voluntarily terminates his employment with the Company or is
discharged for "Cause" as that term is defined in section 7.3 of that certain
Employment Agreement by and between Purchaser and the Company dated October 24,
1997, for a period of 30 days after the date of such termination event, the
Company will have an assignable right, but not an obligation, to repurchase any
Restricted Shares owned by Purchaser (or any transferee) that remain Unvested as
of such termination event for a price equal to $10.00 per share, subject to
appropriate adjustment for stock splits, stock dividends and combinations.
3. Restrictions on Transfer.
------------------------
3.1 Certain Definitions. For purposes of this Agreement:
-------------------
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<PAGE>
(a) "SHARES" or "RESTRICTED SHARES" includes all securities issued by
the Company pursuant to section 1 above or by reason of such securities
holdings, including securities issued as a result of a stock split, stock
dividend, and other distributions of securities in the Company made upon, or
in exchange for, other securities of the Company;
(b) "TRANSFER" with respect to Restricted Shares means and includes,
without limitation, a voluntary or involuntary sale, assignment, transfer,
conveyance, pledge, hypothecation, encumbrance, disposal, loan, gift,
attachment or levy on those shares; and
(c) "PERMITTED TRANSFER" means any of the following: (i) a Transfer by
will or under the laws of descent and distribution; or (ii) a Transfer by a
holder of Restricted Shares to his or her ancestors, descendants or spouse
(other than pursuant to a decree of divorce, dissolution or separate
maintenance, a property settlement, or a separation agreement or any similar
agreement or arrangement with a spouse, except for bona fide estate planning
purposes), or to a trust, partnership, limited liability company,
custodianship or other fiduciary account for the benefit of the holder
and/or such ancestors, descendants or spouse, including any Transfer in the
form of a distribution from any such trust, partnership, limited liability
company, custodianship or other fiduciary account to any of the foregoing
permitted beneficial owners or beneficiaries thereof.
3.2 Prohibited and Permitted Transfers. In addition to any other limitation
----------------------------------
on Transfer created by applicable securities laws, no holder of any Unvested
Restricted Shares may Transfer same, or any interest therein, except as
expressly provided in this section 3, and in any event only after compliance
with the specific limitations and conditions set forth in this section 3 and
with all applicable securities laws. All Transfers of Unvested Restricted Shares
not complying with the specific limitations and conditions set forth in this
section 3 are expressly prohibited. Any prohibited Transfer is void and of no
effect, and no purported transferee in connection therewith will be recognized
as a holder of Unvested Restricted Shares for any purpose whatsoever.
3.3 Conditions to Permitted Transfer. Purchaser may Transfer Unvested
--------------------------------
Restricted Shares pursuant to a Permitted Transfer provided that:
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<PAGE>
(a) the transferee of the Restricted Shares will execute such documents
as the Company may reasonably require to ensure that the Company's rights
under this Agreement are adequately protected with respect to such Shares,
including, without limitation, the transferee's agreement to be bound by all
of the terms and conditions of this Agreement, as if he or she were the
original holder of such unvested Restricted Shares; and
(b) the Company is satisfied that such Transfer complies in all
respects with the requirements imposed by applicable state and federal
securities laws and regulations.
4. Market Stand-Off. Purchaser agrees, in connection with the Company's
----------------
"Initial Public Offering," as that term is defined in the Employment Agreement,
that upon request of the underwriters managing such offering, he will not
Transfer any Restricted Shares (other than those Shares included in the
offering) without the prior written consent of such underwriters, for such
period of time (not to exceed 180 days) from the effective date of the
registration statement in connection with such offering, as may be requested by
the underwriters.
5. Representations and Warranties of Purchaser. Purchaser understands that the
-------------------------------------------
Restricted Shares are being offered and sold under one or more of the exemptions
from registration provided for in Sections 4(2) and 3(b) of the Securities Act
of 1933, as amended (the "Act"), including Regulation D promulgated thereunder
and that the Company's reliance upon such exemption(s) is predicated upon
Purchaser's representations set forth in this Agreement, and that Purchaser is
purchasing the Restricted Shares, without being offered or furnished any
offering literature or prospectus. Purchaser also understands that this
transaction has not been scrutinized by the Securities and Exchange Commission
or by any administrative agency charged with the administration of the
securities laws of any state. Purchaser hereby further represents, warrants and
covenants as follows:
5.1 Purchaser has such knowledge and experience in financial and business
matters as to be capable of evaluating the risks of an investment in the
Restricted Shares and understands that (i) this investment is suitable only for
an investor who is able to bear the economic consequences of losing his, entire
investment, (ii) the Company is a start-up enterprise with no financial and
operating history, (iii) an investment in the Restricted Shares is a speculative
investment which involves a high degree of risk of loss by Purchaser of his
investment therein, and (iv) there are substantial restrictions on the
transferability of, and there
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<PAGE>
will be no public market for, the Restricted Shares and accordingly, it may not
be possible to liquidate Purchaser's investment in the Restricted Shares in the
case of emergency;
5.2 he understands that the Restricted Shares have not been registered
under the Securities Act of 1933, as amended (the "1933 ACT"), and that the same
are not freely tradeable and must be held indefinitely unless they are either
registered under the 1933 Act or an exemption from such registration is
available. He understands that the Company is under no obligation to register
any Restricted Shares. He also understands that the Restricted Shares have not
been qualified under the securities laws of any state and are to be offered and
sold pursuant to an exception from qualification under applicable state
securities laws;
5.3 Purchaser is an "accredited investor" under Regulation D promulgated
under the Act and has the financial ability to bear the economic risk of an
investment in the Restricted Shares and to hold the Restricted Shares for an
indefinite period of time; and
5.4 Purchaser is acquiring the Restricted Shares in good faith solely for
his personal account, for investment purposes only, and the Restricted Shares
are not being purchased with a view to or for the resale, resyndication,
distribution, subdivision or fractionalization thereof.
6. Indemnification. Purchaser shall indemnify and hold harmless the Company,
---------------
its officers, directors and any of its affiliates, associates, agents or
employees from and against any and all loss, damage or liability (including
costs and attorneys' fees) due to or arising out of a breach of any
representation, warranty or acknowledgment made by Purchaser in this Agreement.
7. Miscellaneous.
-------------
7.1 Assignment. This Agreement is not assignable by any party, except as
----------
expressly provided herein. All of the covenants and provisions of this Agreement
by or for the benefit of the Company or of Purchaser shall bind and inure to the
benefit of their respective successors.
7.2 Notices. Any notice, request, claim or other communication hereunder
-------
will be in writing and will be deemed to have been duly given if delivered by
hand or if sent by certified mail, postage and certification prepaid, to the
party at the address listed below each party's respective
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<PAGE>
signature line, or to such other address or addresses as the party or parties
may have furnished in writing in accordance herewith.
7.3 Entire Agreement; Amendments. This Agreement and the Employment
----------------------------
Agreement constitutes the final and complete expression of all of the terms of
the understanding and agreement between the parties hereto concerning the
subject matter hereof. This Agreement may not be modified, amended, altered or
supplemented except by means of the execution and delivery of a written
instrument mutually executed by the Company and Purchaser.
7.4 Specific Performance. By accepting the Restricted Shares, Purchaser and
--------------------
any transferee thereof thereby acknowledges and agrees that money damages will
be inadequate to compensate the Company and its shareholders if Purchaser fails
to cooperate with the Company in the event it chooses to timely exercise its
rights to repurchase the Restricted Shares as provided herein, and such
repurchase is not completed as contemplated hereunder, and that the Company
will, in such case, be entitled to a decree of specific performance of the terms
hereof or to an injunction restraining such holder (or such holder's personal
representative) from violating this Agreement, in addition to any other remedies
that may be available to the Company at law or in equity.
7.5 Governing Law. This Agreement will be construed and governed by the
-------------
substantive laws of the State of California.
7.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement.
Towing America, Inc.
By:---------------------------------------------------
Its:--------------------------------------------------
Address:----------------------------------------------
----------------------------------------------
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<PAGE>
Purchaser:
------------------------------------------------------
Address:----------------------------------------------
----------------------------------------------
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<PAGE>
CONSENT OF SPOUSE
I am the spouse of Edward T. Sheehan, who together with Towing America,
Inc., have entered into the Stock Purchase and Restriction Agreement (the
"Agreement") to which this Consent is attached. Capitalized terms not defined
herein will have the meaning set forth in such agreement.
I have read and understand the Agreement. I acknowledge that, by
execution hereof, I am bound by the Agreement as to any and all interests I may
have in the Restricted Shares, In particular, I understand and agree that the
Restricted Shares is subject to certain risks of forfeiture to the Company and
certain restrictions on transfer.
I also agree with my spouse and the Company that if my spouse and I ever
get divorced or enter into any marital property settlement agreement, or if my
spouse or I ever seek a decree of separate maintenance, to the extent my spouse
has or can obtain assets other than the Restricted Shares in amounts and of
value sufficient to settle or satisfy any marital property claims I may have in
the value of the Restricted Shares, I will accept such other assets in
settlement of those claims.
I agree that I will not do anything to try to prevent the operation of
any part of the Stock Purchase and Restriction Agreement. I acknowledge that I
have had an opportunity to obtain independent counsel to advise me concerning
the matters contained herein.
Dated:------------- Signature:-----------------------------------------
Print Name:----------------------------------------
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<PAGE>
EXHIBIT 10.3
Executive Employment Agreement
------------------------------
This Executive Employment Agreement ("Agreement") is made and entered into as
of October __, 1997 (the "Effective Date") by and between Towing America, Inc.,
a Delaware corporation (the "Company") and Edward T. Sheehan, an individual
resident of the State of New York ("Executive"), with reference to the
following:
B a c k g r o u n d
A. The Company is a newly formed entity that intends to pursue
consolidation opportunities in the towing services business (the
"Business").
B. Executive has previously served in senior management capacities in
businesses similar to the Business.
C. The Company now desires to retain the full-time services of Executive as
Chief Executive Officer of the Company, and Executive is willing to be
employed by the Company in that capacity on the terms and conditions set
forth in this Agreement.
Now Therefore, the Company and Executive hereby agree as follows:
1. Employment. The Company hereby employs Executive on the terms set forth
----------
herein and Executive hereby accepts such employment, commencing on the date of
filing of a Registration Statement with the Securities Exchange Commission in
connection with the Company's Initial Public Offering (the "Commencement Date")
for a term of three years (the "Employment Term"), unless sooner terminated
under Section 7 below. For purposes of this Agreement, "Initial Public Offering"
of "IPO" means the Company's first firm commitment underwritten offering of its
securities pursuant to a registration statement under the Securities Act of
1933, as amended.
2. Duties. During the period of his employment with the Company hereunder,
------
Executive will be employed as Chief Executive Officer of the Company. In
addition, upon execution of this Agreement, Executive will be elected to the
Board of Directors of the Company. Executive will:
(a) devote his full business time, ability, knowledge and attention, and
give his best effort and skill solely to the Company's business affairs and
interests;
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<PAGE>
(b) perform such services and assume such duties and responsibilities
appropriate to the positions identified above as well as those which may from
time to time be reasonably assigned to him by the Board of Directors of the
Company, to whom Executive will directly report; and
(c) in all respects use his best efforts to further, enhance and develop
the Company's business affairs, interests and welfare.
3. Compensation. In consideration of Executive's services to the Company
------------
during the Employment Term, Executive will receive the following:
(a) Commencing upon the consummation of the Initial Public Offering, the
Company will pay Executive a gross base salary of $200,000 per annum during the
Employment term, subject to the review by the Company's underwriters at or
around the time of IPO. Executive's base salary will be paid in equal
installments (pro rated for portions of a pay period) on the Company's regular
pay days and the Company will withhold from such compensation all applicable
federal and state income, social security, and disability and other taxes as
required by applicable laws. The Company may also pay Executive such bonuses as
are determined from time to time by the Board of Directors.
(b) From time to time following the Company's Initial Public Offering,
in the sole discretion of the Company's Board of Directors, stock options to
purchase additional shares of Common Stock of the Company in accordance with a
stock option plan to be adopted by the Company which will contain, among other
things, provisions for vesting of the shares subject to options granted
thereunder.
4. Company Shares. As soon as reasonably practicable after the execution of
--------------
this Agreement, Executive will purchase at fair market value shares of Common
Stock of the Company expected to represent 6% of the outstanding shares on the
consummation of the IPO. If Executive voluntarily terminates his employment
hereunder during the 18 months of the Employment Term, or if Executive is
discharged under Section 7.3 hereof during such 18 month period, then the
Company may, during the 30 day period following such termination, buy back fifty
percent (50%) of the shares purchased pursuant to this Section 4 at the price
Executive paid for such shares. The Company may exercise this right by written
notice to the executive and within five business days of delivery of such notice
Executive shall deliver the certificate(s) representing the shares so
repurchased to the Company's Secretary at the executive offices of the Company
and the Company shall deliver its cashier's or certified check in the amount of
such purchase price to Executive at such offices.
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<PAGE>
5. Change of Control. In the event of any Change of Control of the Company,
-----------------
then (i) any and all of Executive's stock options that are unvested as of the
effective date of such Change of Control will become vested immediately prior to
such event and (ii) Executive will receive from the Company an aggregate payment
equal to three (3) times his gross base salary, payable in accordance with the
provisions of Section 3(a) above; provided however, that in the event that the
Company determines, in its sole discretion, that any portion of the same
constitutes an excess parachute payment under ss280G of the Internal Revenue
Code of 1986, as amended, then the Company will have no obligation to provide
such portion to the Executive. For purposes of this Agreement, a "Change of
Control" means (a) the sale of all or substantially all of the assets of the
Company to any person or entity that, prior to such sale, did not control, was
not under common control with, or was not controlled by, the Company, or (b) a
merger or consolidation or other reorganization in which the Company is not the
surviving entity or becomes owned entirely by another entity, unless at least
fifty percent (50%) of the outstanding voting securities of the surviving or
parent corporation, as the case may be, immediately following such transaction
are beneficially held by such persons and entities in the same proportion as
such persons and entities beneficially held the outstanding voting securities of
the Company immediately prior to such transaction, or (c) the sale or other
change of beneficial ownership of at least fifty percent (50%) of the
outstanding voting securities of the Company to any person or "group" as that
term is defined under the Securities Exchange Act of 1934, as amended.
6. Benefits and Reimbursements.
---------------------------
6.1 Executive will, during the Employment Term, have the right to receive
such benefits as are generally made available to full-time executive officers of
the Company, including the right to participate in any retirement plan or
executive bonus plan that the Company may create. In addition, or inclusive of
such benefits, the Company will provide Executive with the following:
(a) the opportunity to apply for coverage under the Company's medical,
life and disability plans, if any. If the Executive is accepted for coverage
under such plans, the Company will provide to Executive and his immediate
family such coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to time.
(b) in addition to normal holidays recognized by the Company, Executive
will be entitled to three weeks paid vacation annually, provided that any
vacation may be taken by Executive at any time Executive deems appropriate,
upon consultation with the Board of Directors, which
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<PAGE>
may determine that the best interests of the Company require otherwise.
6.2 The Company will reimburse Executive for travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his duties
hereunder, provided that all such expenses will be reimbursed only (i) upon the
presentation by Executive to the Company of such documentation as may be
reasonably necessary to substantiate that all such expenses were incurred in the
performance of his duties, and (ii) if such expenses are consistent with all
policies of the Company in effect from time to time as to the kind and amount of
such expenses.
7. Termination of Employment.
-------------------------
7.1 Expiration of the Term of Agreement. This Agreement will terminate
-----------------------------------
automatically upon the expiration of the Employment Term. On or about three
months prior to the date of such termination, the Company will provide Executive
with written notice of non-renewal of this Agreement.
7.2 Death or Permanent Disability of Executive. This Agreement will
------------------------------------------
terminate upon the death or permanent disability of Executive. Executive will be
deemed permanently disabled for the purpose of this Agreement if, in the good
faith determination of the Board of Directors, based on sound medical advice,
Executive has become physically or mentally incapable of performing his duties
hereunder for a continuous period of one hundred eighty (180) days, in which
event Executive will be deemed permanently disabled upon the expiration of such
one hundred eighty (180) day period.
7.3 Executive's Discharge for Cause. The Company will have the right to
-------------------------------
terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written notice setting forth with particularity the facts and
circumstances constituting such Cause. For such purposes, "Cause" means the
occurrence of one or more of the following: (i) the commission by Executive of
any act materially detrimental to the Company, including fraud, embezzlement,
theft, bad faith, gross negligence, recklessness or willful misconduct; (ii)
incompetence or repeated failure or refusal to perform the duties required by
this Agreement and as may be assigned to Executive by the Company's Board of
Directors from time to time; (iii) conviction of a felony or of any crime of
moral turpitude to the extent materially detrimental to the Company; (iv) any
material misrepresentation by Executive to the Company regarding the operation
of the business; or (v) breach of any covenant of this Agreement, provided that
the action or conduct described in clauses (ii) or (v) above will constitute
"Cause" only if such action or conduct continues after the Company has provided
Executive with written notice thereof and a reasonable opportunity (to be not
less than 30 days) to cure the same.
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<PAGE>
7.4 The Company's Right to Terminate At Will. Subject to the payment to
----------------------------------------
Executive of the applicable severance payments as provided in Section 7.5 below,
the Company will have the right (in addition to its right of termination under
Section 7.1 above), exercisable at any time during the term of this Agreement,
to terminate Executive's employment with the Company without "Cause" (as defined
in Section 7.3 above), immediately upon written notice to Executive.
7.5 Compensation Upon Termination.
-----------------------------
(a) Upon termination of Executive's employment pursuant to this Section
7, Executive will be entitled to only: (i) the compensation provided for in
Section 3(a) hereof for the period of time ending with the date of termination;
(ii) compensation for any unused vacation that Executive may have accrued, as
well as all earned benefits, up to and including the date of termination; (iii)
"COBRA" benefits to the extent required by applicable law; and (iv)
reimbursement for such expenses as Executive may have properly incurred on
behalf of the Company as provided in Section 7.2 above prior to the date of
termination. Notwithstanding the foregoing, if the Executive's employment is
terminated pursuant to Section 7.1 or 7.4 above, Executive will have the right
to retain the coverage provided in Section 6.1(a) above, at no charge to
Executive, for a period of two years following the effective date of such
termination.
(b) If the Company terminates Executive's employment pursuant to Section
7.4 above only, in addition to the amounts payable in Section 7.5(a) above,
Executive will be entitled to receive a severance payment in the following
amount: (i) if such termination occurs during the last six months of the
Employment Term, Executive will be entitled to receive an amount equal to the
aggregate base salary paid to Executive by the Company pursuant to Section 3(a)
above during a period of time equal to the difference between six months and the
period between Executive's notice of termination and the effective date of
termination; or (ii) if such termination occurs at any time other than during
the last six months of the Employment Term, Executive will be entitled to
receive an amount equal to the aggregate base salary paid to Executive by the
Company pursuant to Section 3(a) above during the preceding six month period, or
lesser period beginning on the Commencement Date and ending on the effective
date of termination.
(c) The payments set forth in this Section 7.5 will fully discharge all
responsibilities of the Company to Executive under this Agreement or relating to
or arising out of the termination of Executive's employment.
8. Unfair Competition by Executive.
-------------------------------
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<PAGE>
8.1 Executive agrees that all trade secrets, confidential or proprietary
information with respect to the activities and businesses of the Company,
including, without limitation, personnel information, secret processes, know-
how, customer lists, databases, ideas, techniques, processes, inventions
(whether patentable or not), and other technical plans, business plans,
marketing plans, product plans, forecasts, contacts, strategies and information
(collectively "Proprietary Information") which were learned by Executive in the
course of his employment by the Company, and any other Proprietary Information
received, developed or learned by Executive hereafter in the course of his
future employment by or in association with the Company, are confidential and
will be kept and held in confidence and trust as a fiduciary by Executive.
Executive will not use or disclose Proprietary Information of the Company except
as necessary in the normal course of the business of the Company for its sole
and exclusive benefit, unless Executive is compelled so to disclose under
process of law, in which case Executive will first notify the Company promptly
after receipt of a demand to so disclose.
8.2 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 8.1 and 9 of this Agreement is necessary,
fundamental, and required for the protection of the Company's business; (ii)
such relate to matters which are of a special, unique, and extraordinary
character that gives each of them a special, unique, and extraordinary value;
and (iii) a breach of any such covenant or restriction will result in
irreparable harm and damage to the Company which cannot be compensated
adequately by a monetary award. Accordingly, it is expressly agreed that, in
addition to all other remedies available at law or in equity, and
notwithstanding anything to the contrary in Section 11 below, the Company will
be entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable relief as
may be used by any court of competent jurisdiction to restrain or enjoin any of
the parties hereto from breaching any such covenant or restriction, or otherwise
specifically to enforce the provisions contained in Sections 8.1 and 9 of this
Agreement.
8.3 Except for activities expressly permitted by the prior written approval
of the Board of Directors of the Company, during the term of this Agreement, the
Executive will not: (a) engage in business independent of the Executive's
employment by the Company that requires any substantial portion of the
Executive's time; (b) serve as an officer, general partner or member in any for-
profit corporation, partnership or firm; (c) serve as a director of any
corporation, partnership of firm having the Business as its principal
enterprise; or (d) directly, indirectly or through any Affiliate, invest in,
participate in or acquire an interest in any entity engaged in the Business. For
purposes of this Agreement, the terms: (i) "Affiliate" means as to any Person,
each other Person that directly or indirectly (through one (1) or
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more intermediaries) controls, is controlled by or is under common control with
such person; and (ii) "Person" means an individual, corporation, partnership,
limited liability company, association, joint stock company, trust, associate
(as defined in regulations promulgated by the Securities Exchange Commission) or
other legally recognizable entity. The limitation in this paragraph will not
prohibit any investment by the Executive in securities that are listed on a
public exchange or the National Association of Securities Dealers Automated
Quotation National Market System and issued by a company, firm, corporation,
partnership, trust or other entity involved in the Business or otherwise.
8.4 During the term of this Agreement and for a period of one year
following its termination for any reason, Executive will not contact or solicit
any employees of the Company for the purposes of hiring them.
9. Proprietary Matters. Executive expressly understands and agrees that any
-------------------
and all improvements, inventions, discoveries, processes, or know-how that are
generated or conceived by Executive during the term of this Agreement, whether
so generated or conceived during Executive's regular working hours or otherwise,
will be the sole and exclusive property of the Company, and Executive will,
whenever requested to do so by the Company (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which the Company may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce
and defend patents, copyrights, trade names or trademarks of the United States
or of foreign countries for said improvements, inventions, discoveries,
processes, or know-how, or in order to assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in
and to said improvements, inventions, discoveries, processes, know-how,
applications, patents, copyrights, trade names or trademarks, subject to
California Labor Code ss2870, which reads as follows:
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
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<PAGE>
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
10. Key-Person Insurance. Executive agrees to make himself available and to
--------------------
undergo, at the Company's request and expense, any physical examination or other
procedure necessary to allow the Company to obtain a key-person insurance policy
on Executive. If the Company obtains such policy, it will maintain the policy at
its expense and all proceeds will be the sole property of the Company.
11. Resolution of Disputes. The parties will attempt in good faith
----------------------
promptly by negotiations to resolve any dispute or controversy arising out of or
relating to this Agreement or to the employment or termination of Executive by
the Company. If a party intends to be accompanied at a negotiation meeting by an
attorney, the other party will be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
12. Miscellaneous.
-------------
12.1 Governing Law; Interpretation. This Agreement will be governed by the
-----------------------------
substantive laws of the State of New York applicable to contracts entered into
and fully performed in such jurisdiction. The headings and captions of the
Sections of this Agreement are for convenience only and in no way define, limit
or extend the scope or intent of this Agreement or any provision hereof. This
Agreement will be construed as a whole, according to its fair meaning, and not
in favor of or against any party, regardless of which party may have initially
drafted certain provisions set forth herein.
12.2 Assignment. This Agreement is personal to Executive and he may not
----------
assign any of his rights or delegate any of his obligations hereunder without
first obtaining the prior written consent of the Board of Directors of the
Company.
12.3 Notices. Any notice, request, claim or other communication required or
-------
permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by certified mail,
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<PAGE>
postage and certification prepaid, to Executive at his residence (as noted in
the Company's records), or to the Company at its address as set forth below its
signature on the signature page of this Agreement, or to such other address or
addresses as either party may have furnished to the other in writing in
accordance herewith.
12.4 Severability. If any provision of this Agreement or the application of
------------
any such provision to either of the parties is held by a court of competent
jurisdiction to be contrary to law, such provision will be deemed amended to the
extent necessary to comply with such law, and the remaining provisions of this
Agreement will remain in full force and effect unless the result would be
manifestly unjust or would deprive either party of the benefit of its bargain.
12.5 Entire Agreement; Amendments. This Agreement and any other exhibits
----------------------------
and attachments hereto constitutes the final and complete expression of all of
the terms of the understanding and agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement replaces and supersedes
any and all prior or contemporaneous negotiations, communications,
understandings, obligations, commitments, agreements or contracts, whether
written or oral, between the parties respecting the subject matter hereof.
Except as provided in Section 12.4 above, this Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by both parties.
12.6 Attorneys' Fees. If it becomes necessary for any party to initiate
---------------
legal action or any other proceeding to enforce, defend or construe such party's
rights or obligations under this Agreement, the prevailing party will be
entitled to its reasonable costs and expenses, including attorneys' fees,
incurred in connection with such action or proceeding.
13. EXECUTIVE ACKNOWLEDGMENT. EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN
------------------------
GIVEN THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL CONCERNING THE RIGHTS AND
OBLIGATIONS ARISING UNDER THIS AGREEMENT, THAT HE HAS READ AND UNDERSTANDS
EACH AND EVERY PROVISION OF THIS AGREEMENT, AND THAT HE IS FULLY AWARE OF THE
LEGAL EFFECT AND IMPLICATIONS OF THIS AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Company: Executive:
Towing America, Inc. Edward T. Sheehan
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
Address:_______________________ Address:_______________________
_______________________ _______________________
Fax: _______________________ Fax: _______________________
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<PAGE>
EXHIBIT 10.4
Executive Employment Agreement
------------------------------
This Executive Employment Agreement ("Agreement") is made and entered into as
of ______________, 1998 (the "Effective Date") by and between United Road
Services, Inc., a Delaware corporation (the "Company") and Mark McKinney, an
individual resident of the State of Colorado ("Executive"), with reference to
the following:
B a c k g r o u n d
A. The Company is a newly formed entity that intends to pursue
consolidation opportunities in the towing services business (the
"Business").
B. The Company now desires to retain the full-time services of Executive as
Co-Chief Acquisition Officer of the Company, and Executive is willing to
be employed by the Company in that capacity on the terms and conditions
set forth in this Agreement.
Now Therefore, the Company and Executive hereby agree as follows:
1. Employment. The Company hereby employs Executive on the terms set forth
----------
herein and Executive hereby accepts such employment commencing on the Effective
Date for a term of three years (the "Employment Term"), unless sooner terminated
under Section 6 below.
2. Duties. During the period of his employment with the Company hereunder,
------
Executive will be employed as Co-Chief Acquisition Officer. Executive will:
(a) devote his full business time, ability, knowledge and attention, and
give his best effort and skill solely to the Company's business affairs and
interests;
(b) perform such services and assume such duties and responsibilities
appropriate to the positions identified above as well as those which may from
time to time be reasonably assigned to him by the Chief Executive Officer of the
Company or by such other person to whom he may be directed to report by the
Chief Executive Officer or the Board of Directors of the Company; and
(c) in all respects use his best efforts to further, enhance and develop
the Company's business affairs, interests and welfare.
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<PAGE>
3. Compensation. In consideration of Executive's services to the Company
------------
during the Employment Term, commencing upon the consummation of the Initial
Public Offering, the Company will pay Executive a gross base salary of $150,000
per annum during the Employment Term, subject to the review by the Company's
underwriters at or around the time of IPO. Executive's base salary will be paid
in equal installments (pro rated for portions of a pay period) on the Company's
regular pay days and the Company will withhold from such compensation all
applicable federal and state income, social security, and disability and other
taxes as required by applicable laws. The Company may also pay Executive such
bonuses as are determined from time to time by the Board of Directors. For
purposes of this Agreement, "Initial Public Offering" or "IPO" means the
Company's first firm commitment underwritten offering of its securities pursuant
to a registration statement under the Securities Act of 1933, as amended.
4. Change of Control. In the event of any Change of Control of the Company
-----------------
pursuant to which Executive's employment is terminated either (i) by Executive
or (ii) by the Company (or a successor entity), in either case within ninety
(90) days following the effective date of such Change of Control, then (i) any
and all of Executive's stock options that are unvested as of the effective date
of such Change of Control will become vested immediately prior to such event and
(ii) Executive will receive from the Company an aggregate payment equal to three
(3) times his gross base salary, payable in accordance with the provisions of
Section 3 above; provided however, that in the event that the Company
determines, in its sole discretion, that any portion of the same constitutes an
excess parachute payment under ss280G of the Internal Revenue Code of 1986, as
amended, then the Company will have no obligation to provide such portion to the
Executive. For purposes of this Agreement, a "Change of Control" means (a) the
sale of all or substantially all of the assets of the Company to any person or
entity that, prior to such sale, did not control, was not under common control
with, or was not controlled by, the Company, or (b) a merger or consolidation or
other reorganization in which the Company is not the surviving entity or becomes
owned entirely by another entity, unless at least fifty percent (50%) of the
outstanding voting securities of the surviving or parent corporation, as the
case may be, immediately following such transaction are beneficially held by
such persons and entities in the same proportion as such persons and entities
beneficially held the outstanding voting securities of the Company immediately
prior to such transaction, or (c) the sale or other change of beneficial
ownership of at least fifty percent (50%) of the outstanding voting securities
of the Company to any person or "group" as that term is defined under the
Securities Exchange Act of 1934, as amended; it being agreed, in any event, that
the issuances of shares to the stockholders of the founding companies
consolidating with the Company at the time of the IPO, and the issuance of
shares in the IPO, shall in no event constitute a Change of Control.
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<PAGE>
5. Benefits and Reimbursements.
---------------------------
5.1 Executive will, during the Employment Term, have the right to receive
such benefits as are generally made available to full-time executive officers of
the Company, including the right to participate in any retirement plan or
executive bonus plan that the Company may create. In addition, or inclusive of
such benefits, the Company will provide Executive with the following:
(a) the opportunity to apply for coverage under the Company's medical,
life and disability plans, if any. If the Executive is accepted for coverage
under such plans, the Company will provide to Executive and his immediate
family such coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to time.
(b) in addition to normal holidays recognized by the Company, Executive
will be entitled to three weeks paid vacation annually, provided that any
vacation may be taken by Executive at any time Executive deems appropriate,
upon consultation with the Board of Directors, which may determine that the
best interests of the Company require otherwise.
5.2 The Company will reimburse Executive for travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his duties
hereunder, provided that all such expenses will be reimbursed only (i) upon the
presentation by Executive to the Company of such documentation as may be
reasonably necessary to substantiate that all such expenses were incurred in the
performance of his duties, and (ii) if such expenses are consistent with all
policies of the Company in effect from time to time as to the kind and amount of
such expenses.
6. Termination of Employment.
-------------------------
6.1 Expiration of the Term of Agreement. This Agreement will terminate
-----------------------------------
automatically upon the expiration of the Employment Term. On or about three
months prior to the date of such termination, the Company will provide Executive
with written notice of non-renewal of this Agreement.
6.2 Death or Permanent Disability of Executive. This Agreement will
------------------------------------------
terminate upon the death or permanent disability of Executive. Executive will be
deemed permanently disabled for the purpose of this Agreement if, in the good
faith determination of the Board of Directors, based on sound medical advice,
Executive has become physically or mentally incapable of performing his duties
hereunder for a continuous period of one hundred
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<PAGE>
eighty (180) days, in which event Executive will be deemed permanently disabled
upon the expiration of such one hundred eighty (180) day period.
6.3 Executive's Discharge for Cause. The Company will have the right to
-------------------------------
terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written notice setting forth with particularity the facts and
circumstances constituting such Cause. For such purposes, "Cause" means the
occurrence of one or more of the following: (i) the commission by Executive of
any act materially detrimental to the Company, including fraud, embezzlement,
theft, bad faith, gross negligence, recklessness or willful misconduct; (ii)
incompetence or repeated failure or refusal to perform the duties required by
this Agreement and as may be assigned to Executive by the Chief Executive
Officer of the Company or by such other person to whom Executive is directed to
report from time to time by the Chief Executive Officer or the Board of
Directors of the Company; (iii) conviction of a felony or of any crime of moral
turpitude to the extent materially detrimental to the Company; (iv) any material
misrepresentation by Executive to the Company regarding the operation of the
business; or (v) breach of any covenant of this Agreement, provided that the
action or conduct described in clauses (ii) or (v) above will constitute "Cause"
only if such action or conduct continues after the Company has provided
Executive with written notice thereof and a reasonable opportunity (to be not
less than 30 days) to cure the same.
6.4 The Company's Right to Terminate At Will. Subject to the payment to
----------------------------------------
Executive of the applicable severance payments as provided in Section 6.5 below,
the Company will have the right (in addition to its right of termination under
Section 6.1 above), exercisable at any time during the term of this Agreement,
to terminate Executive's employment with the Company without "Cause" (as defined
in Section 6.3 above), immediately upon written notice to Executive.
6.5 Compensation Upon Termination.
-----------------------------
(a) Upon termination of Executive's employment pursuant to this Section
6, Executive will be entitled to only: (i) the compensation provided for in
Section 3 above for the period of time ending with the date of termination; (ii)
compensation for any unused vacation that Executive may have accrued, as well as
all earned benefits, up to and including the date of termination; (iii) "COBRA"
benefits to the extent required by applicable law; and (iv) reimbursement for
such expenses as Executive may have properly incurred on behalf of the Company
as provided in Section 6.2 above prior to the date of termination.
(b) If the Company terminates Executive's employment pursuant to Section
6.4 above only, in addition to the amounts payable in Section
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<PAGE>
6.5(a) above, Executive will be entitled to receive a severance payment in an
amount equal to the base salary paid to Executive by the Company pursuant to
Section 3 above for a period of one year. Notwithstanding anything to the
contrary in this Section 6.5(b), Executive's severance payment from the Company
immediately will cease if Executive accepts new employment with any person,
persons, company, partnership corporation or business of whatever nature.
(c) The Company will pay the severance payment described in Section
6.5(b) above in periodic payments, in accordance with the payment schedule set
forth in Section 3 above.
(d) The payments set forth in this Section 6.5 will fully discharge all
responsibilities of the Company to Executive under this Agreement or relating to
or arising out of the termination of Executive's employment.
7. Unfair Competition by Executive.
-------------------------------
7.1 Executive agrees that all trade secrets, confidential or proprietary
information with respect to the activities and businesses of the Company,
including, without limitation, personnel information, secret processes, know-
how, customer lists, databases, ideas, techniques, processes, inventions
(whether patentable or not), and other technical plans, business plans,
marketing plans, product plans, forecasts, contacts, strategies and information
(collectively "Proprietary Information") which were learned by Executive in the
course of his employment by the Company, and any other Proprietary Information
received, developed or learned by Executive hereafter in the course of his
future employment by or in association with the Company, are confidential and
will be kept and held in confidence and trust as a fiduciary by Executive.
Executive will not use or disclose Proprietary Information of the Company except
as necessary in the normal course of the business of the Company for its sole
and exclusive benefit, unless Executive is compelled so to disclose under
process of law, in which case Executive will first notify the Company promptly
after receipt of a demand to so disclose.
7.2 During the term of this Agreement and for a period of one year
following its termination for any reason, directly or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, Executive will not:
(a) engage, as an officer, director, shareholder, owner, partner, joint
venturer, financier, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
corporation, partnership, firm or other entity
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<PAGE>
engaged in the Business that is within 100 miles of the principal places
of business of the Company or any of the Company's subsidiaries, or of any
geographic location in which Executive has represented the interests of the
Company or any of its subsidiaries (the "Territory");
(b) call upon any prospective acquisition candidate engaged in the
Business on Executive's own behalf or on behalf of any competitor of the Company
or any of its subsidiaries, which candidate was either called upon by the
Company (including its subsidiaries) for the purpose of acquiring such entity.
(c) contact or solicit any employees of the Company or its subsidiaries
for the purposes of hiring them.
7.3 Except for activities expressly permitted by the prior written approval
of the Board of Directors of the Company, during the term of this Agreement, the
Executive will not: (a) engage in business independent of the Executive's
employment by the Company that requires any substantial portion of the
Executive's time; (b) serve as an officer, general partner or member in any for-
profit corporation, partnership or firm; (c) serve as a director of any
corporation, partnership or firm having the Business as its principal
enterprise; or (d) directly, indirectly or through any Affiliate, invest in,
participate in or acquire an interest in any entity engaged in the Business. For
purposes of this Agreement, the terms: (i) "Affiliate" means as to any Person,
each other Person that directly or indirectly (through one (1) or more
intermediaries) controls, is controlled by or is under common control with such
person; and (ii) "Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust, associate (as
defined in regulations promulgated by the Securities Exchange Commission) or
other legally recognizable entity. The limitation in this paragraph will not
prohibit any investment by the Executive in securities that are listed on a
public exchange or the National Association of Securities Dealers Automated
Quotation National Market System and issued by a company, firm, corporation,
partnership, trust or other entity involved in the Business or otherwise.
7.4 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 7.1, 7.2 and 8 of this Agreement is necessary,
fundamental, and required for the protection of the Company's business; (ii)
such relate to matters which are of a special, unique, and extraordinary
character that gives each of them a special, unique, and extraordinary value;
and (iii) a breach of any such covenant or restriction will result in
irreparable harm and damage to the Company which cannot be compensated
adequately by a monetary award. Accordingly, it is expressly agreed that, in
addition to all other remedies available at law or in equity, and
notwithstanding anything to the contrary in Section 10 below, the
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<PAGE>
Company will be entitled to the immediate remedy of a temporary restraining
order, preliminary injunction, or such other form of injunctive or equitable
relief as may be used by any court of competent jurisdiction to restrain or
enjoin any of the parties hereto from breaching any such covenant or
restriction, or otherwise specifically to enforce the provisions contained in
Sections 7.1, 7.2 and 8 of this Agreement.
8. Proprietary Matters. Executive expressly understands and agrees that any
-------------------
and all improvements, inventions, discoveries, processes, or know-how that are
generated or conceived by Executive during the term of this Agreement, whether
so generated or conceived during Executive's regular working hours or otherwise,
will be the sole and exclusive property of the Company, and Executive will,
whenever requested to do so by the Company (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which the Company may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce
and defend patents, copyrights, trade names or trademarks of the United States
or of foreign countries for said improvements, inventions, discoveries,
processes, or know-how, or in order to assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in
and to said improvements, inventions, discoveries, processes, know-how,
applications, patents, copyrights, trade names or trademarks.
9. Key-Person Insurance. Executive agrees to make himself available and to
--------------------
undergo, at the Company's request and expense, any physical examination or other
procedure necessary to allow the Company to obtain a key-person insurance policy
on Executive. If the Company obtains such policy, it will maintain the policy at
its expense and all proceeds will be the sole property of the Company.
10. Resolution of Disputes. The parties will attempt in good faith promptly
----------------------
by negotiations to resolve any dispute or controversy arising out of or relating
to this Agreement or to the employment or termination of Executive by the
Company. If a party intends to be accompanied at a negotiation meeting by an
attorney, the other party will be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
11. Miscellaneous.
-------------
11.1 Governing Law; Interpretation. This Agreement will be governed by the
-----------------------------
substantive laws of the State of New York applicable to contracts entered into
and fully performed in such jurisdiction. The
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<PAGE>
headings and captions of the Sections of this Agreement are for convenience only
and in no way define, limit or extend the scope or intent of this Agreement or
any provision hereof. This Agreement will be construed as a whole, according to
its fair meaning, and not in favor of or against any party, regardless of which
party may have initially drafted certain provisions set forth herein.
11.2 Assignment. This Agreement is personal to Executive and he may not
----------
assign any of his rights or delegate any of his obligations hereunder without
first obtaining the prior written consent of the Board of Directors of the
Company.
11.3 Notices. Any notice, request, claim or other communication required or
-------
permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by certified mail, postage and
certification prepaid, to Executive at his residence (as noted in the Company's
records), or to the Company at its address as set forth below its signature on
the signature page of this Agreement, or to such other address or addresses as
either party may have furnished to the other in writing in accordance herewith.
11.4 Severability. In the event any court of competent jurisdiction shall
------------
determine that the scope, time or territorial restrictions of any provision of
this Agreement are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed. The remaining
provisions of this Agreement will remain in full force and effect unless the
result would be manifestly unjust or would deprive either party of the benefit
of its bargain.
11.5 Entire Agreement; Amendments. This Agreement and any other exhibits
----------------------------
and attachments hereto constitutes the final and complete expression of all of
the terms of the understanding and agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement replaces and supersedes
any and all prior or contemporaneous negotiations, communications,
understandings, obligations, commitments, agreements or contracts, whether
written or oral, between the parties respecting the subject matter hereof.
Except as provided in Section 11.4 above, this Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by both parties.
11.6 Attorneys' Fees. If it becomes necessary for any party to initiate
legal action or any other proceeding to enforce, defend or construe such party's
rights or obligations under this Agreement, the prevailing party will
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<PAGE>
be entitled to its reasonable costs and expenses, including attorneys' fees,
incurred in connection with such action or proceeding.
12. Executive Acknowledgment. Executive acknowledges that he has been
------------------------
given the opportunity to consult with legal counsel concerning the rights and
obligations arising under this Agreement, that he has read and understands
each and every provision of this Agreement, and that he is fully aware of the
legal effect and implications of this Agreement.
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In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Company: Executive:
UNITED ROAD SEREVICES, INC. MARK MC KINNEY
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
Address:_______________________ Address:_______________________
_______________________ _______________________
Fax: _______________________ Fax: _______________________
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EXHIBIT 10.5
Executive Employment Agreement
------------------------------
This Executive Employment Agreement ("Agreement") is made and entered into as
of ________________, 1998 (the "Effective Date") by and between United Road
Services, Inc., a Delaware corporation (the "Company") and Ross Berner, an
individual resident of the State of California ("Executive"), with reference to
the following:
B a c k g r o u n d
A. The Company is a newly formed entity that intends to pursue
consolidation opportunities in the towing services business (the
"Business").
B. The Company now desires to retain the full-time services of Executive as
Co-Chief Acquistion Officer of the Company, and Executive is willing to
be employed by the Company in that capacity on the terms and conditions
set forth in this Agreement.
Now Therefore, the Company and Executive hereby agree as follows:
1. Employment. The Company hereby employs Executive on the terms set forth
----------
herein and Executive hereby accepts such employment commencing on the Effective
Date for a term of three years (the "Employment Term"), unless sooner terminated
under Section 6 below.
2.Duties. During the period of his employment with the Company hereunder,
------
Executive will be employed as Co-Chief Acquisition Officer of the Company.
Executive will:
(a) devote his full business time, ability, knowledge and attention, and
give his best effort and skill solely to the Company's business affairs and
interests;
(b) perform such services and assume such duties and responsibilities
appropriate to the positions identified above as well as those which may from
time to time be reasonably assigned to him by the Chief Executive Officer of the
Company or by such other person to whom he may be directed to report by the
Chief Executive Officer or the Board of Directors of the Company; and
(c) in all respects use his best efforts to further, enhance and develop
the Company's business affairs, interests and welfare.
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3. Compensation. In consideration of Executive's services to the Company
------------
during the Employment Term, commencing upon the consummation of the Initial
Public Offering, the Company will pay Executive a gross base salary of $150,000
per annum during the Employment Term, subject to the review by the Company's
underwriters at or around the time of IPO. Executive's base salary will be paid
in equal installments (pro rated for portions of a pay period) on the Company's
regular pay days and the Company will withhold from such compensation all
applicable federal and state income, social security, and disability and other
taxes as required by applicable laws. The Company may also pay Executive such
bonuses as are determined from time to time by the Board of Directors. For
purposes of this Agreement, "Initial Public Offering" or "IPO" means the
Company's first firm commitment underwritten offering of its securities pursuant
to a registration statement under the Securities Act of 1933, as amended.
4. Change of Control. In the event of any Change of Control of the Company
-----------------
pursuant to which Executive's employment is terminated either (i) by Executive
or (ii) by the Company (or a successor entity), in either case within ninety
(90) days following the effective date of such Change of Control, then (i) any
and all of Executive's stock options that are unvested as of the effective date
of such Change of Control will become vested immediately prior to such event and
(ii) Executive will receive from the Company an aggregate payment equal to three
(3) times his gross base salary, payable in accordance with the provisions of
Section 3 above; provided however, that in the event that the Company
determines, in its sole discretion, that any portion of the same constitutes an
excess parachute payment under ss280G of the Internal Revenue Code of 1986, as
amended, then the Company will have no obligation to provide such portion to the
Executive. For purposes of this Agreement, a "Change of Control" means (a) the
sale of all or substantially all of the assets of the Company to any person or
entity that, prior to such sale, did not control, was not under common control
with, or was not controlled by, the Company, or (b) a merger or consolidation or
other reorganization in which the Company is not the surviving entity or becomes
owned entirely by another entity, unless at least fifty percent (50%) of the
outstanding voting securities of the surviving or parent corporation, as the
case may be, immediately following such transaction are beneficially held by
such persons and entities in the same proportion as such persons and entities
beneficially held the outstanding voting securities of the Company immediately
prior to such transaction, or (c) the sale or other change of beneficial
ownership of at least fifty percent (50%) of the outstanding voting securities
of the Company to any person or "group" as that term is defined under the
Securities Exchange Act of 1934, as amended; it being agreed, in any event, that
the issuances of shares to the stockholders of the founding companies
consolidating with the Company at the time of the IPO, and the issuance of
shares in the IPO, shall in no event constitute a Change of Control.
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5. Benefits and Reimbursements.
---------------------------
5.1 Executive will, during the Employment Term, have the right to receive
such benefits as are generally made available to full-time executive officers of
the Company, including the right to participate in any retirement plan or
executive bonus plan that the Company may create. In addition, or inclusive of
such benefits, the Company will provide Executive with the following:
(a) the opportunity to apply for coverage under the Company's medical,
life and disability plans, if any. If the Executive is accepted for coverage
under such plans, the Company will provide to Executive and his immediate
family such coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to time.
(b) in addition to normal holidays recognized by the Company, Executive
will be entitled to three weeks paid vacation annually, provided that any
vacation may be taken by Executive at any time Executive deems appropriate,
upon consultation with the Board of Directors, which may determine that the
best interests of the Company require otherwise.
5.2 The Company will reimburse Executive for travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his duties
hereunder, provided that all such expenses will be reimbursed only (i) upon the
presentation by Executive to the Company of such documentation as may be
reasonably necessary to substantiate that all such expenses were incurred in the
performance of his duties, and (ii) if such expenses are consistent with all
policies of the Company in effect from time to time as to the kind and amount of
such expenses.
6. Termination of Employment.
-------------------------
6.1 Expiration of the Term of Agreement. This Agreement will terminate
-----------------------------------
automatically upon the expiration of the Employment Term. On or about three
months prior to the date of such termination, the Company will provide Executive
with written notice of non-renewal of this Agreement.
6.2 Death or Permanent Disability of Executive. This Agreement will
------------------------------------------
terminate upon the death or permanent disability of Executive. Executive will be
deemed permanently disabled for the purpose of this Agreement if, in the good
faith determination of the Board of Directors, based on sound medical advice,
Executive has become physically or mentally incapable of performing his duties
hereunder for a continuous period of one hundred
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eighty (180) days, in which event Executive will be deemed permanently disabled
upon the expiration of such one hundred eighty (180) day period.
6.3 Executive's Discharge for Cause. The Company will have the right to
-------------------------------
terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written notice setting forth with particularity the facts and
circumstances constituting such Cause. For such purposes, "Cause" means the
occurrence of one or more of the following: (i) the commission by Executive of
any act materially detrimental to the Company, including fraud, embezzlement,
theft, bad faith, gross negligence, recklessness or willful misconduct; (ii)
incompetence or repeated failure or refusal to perform the duties required by
this Agreement and as may be assigned to Executive by the Chief Executive
Officer of the Company or by such other person to whom Executive is directed to
report from time to time by the Chief Executive Officer or the Board of
Directors of the Company; (iii) conviction of a felony or of any crime of moral
turpitude to the extent materially detrimental to the Company; (iv) any material
misrepresentation by Executive to the Company regarding the operation of the
business; or (v) breach of any covenant of this Agreement, provided that the
action or conduct described in clauses (ii) or (v) above will constitute "Cause"
only if such action or conduct continues after the Company has provided
Executive with written notice thereof and a reasonable opportunity (to be not
less than 30 days) to cure the same.
6.4 The Company's Right to Terminate At Will. Subject to the payment to
----------------------------------------
Executive of the applicable severance payments as provided in Section 6.5 below,
the Company will have the right (in addition to its right of termination under
Section 6.1 above), exercisable at any time during the term of this Agreement,
to terminate Executive's employment with the Company without "Cause" (as defined
in Section 6.3 above), immediately upon written notice to Executive.
6.5 Compensation Upon Termination.
-----------------------------
(a) Upon termination of Executive's employment pursuant to this Section
6, Executive will be entitled to only: (i) the compensation provided for in
Section 3 above for the period of time ending with the date of termination; (ii)
compensation for any unused vacation that Executive may have accrued, as well as
all earned benefits, up to and including the date of termination; (iii) "COBRA"
benefits to the extent required by applicable law; and (iv) reimbursement for
such expenses as Executive may have properly incurred on behalf of the Company
as provided in Section 6.2 above prior to the date of termination.
(b) If the Company terminates Executive's employment pursuant to Section
6.4 above only, in addition to the amounts payable in Section
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6.5(a) above, Executive will be entitled to receive a severance payment in an
amount equal to the base salary paid to Executive by the Company pursuant to
Section 3 above for a period of one year. Notwithstanding anything to the
contrary in this Section 6.5(b), Executive's severance payment from the Company
immediately will cease if Executive accepts new employment with any person,
persons, company, partnership corporation or business of whatever nature.
(c) The Company will pay the severance payment described in Section
6.5(b) above in periodic payments, in accordance with the payment schedule set
forth in Section 3 above.
(d) The payments set forth in this Section 6.5 will fully discharge all
responsibilities of the Company to Executive under this Agreement or relating to
or arising out of the termination of Executive's employment.
7. Unfair Competition by Executive.
-------------------------------
7.1 Executive agrees that all trade secrets, confidential or proprietary
information with respect to the activities and businesses of the Company,
including, without limitation, personnel information, secret processes, know-
how, customer lists, databases, ideas, techniques, processes, inventions
(whether patentable or not), and other technical plans, business plans,
marketing plans, product plans, forecasts, contacts, strategies and information
(collectively "Proprietary Information") which were learned by Executive in the
course of his employment by the Company, and any other Proprietary Information
received, developed or learned by Executive hereafter in the course of his
future employment by or in association with the Company, are confidential and
will be kept and held in confidence and trust as a fiduciary by Executive.
Executive will not use or disclose Proprietary Information of the Company except
as necessary in the normal course of the business of the Company for its sole
and exclusive benefit, unless Executive is compelled so to disclose under
process of law, in which case Executive will first notify the Company promptly
after receipt of a demand to so disclose.
7.2 During the term of this Agreement and for a period of one year
following its termination for any reason, directly or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, Executive will not:
(a) engage, as an officer, director, shareholder, owner, partner, joint
venturer, financier, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
corporation, partnership, firm or other entity
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<PAGE>
engaged in the Business that is within 100 miles of the principal places of
business of the Company or any of the Company's subsidiaries, or of any
geographic location in which Executive has represented the interests of the
Company or any of its subsidiaries (the "Territory");
(b) call upon any prospective acquisition candidate engaged in the
Business on Executive's own behalf or on behalf of any competitor of the Company
or any of its subsidiaries, which candidate was either called upon by the
Company (including its subsidiaries) for the purpose of acquiring such entity.
(c) contact or solicit any employees of the Company or its subsidiaries
for the purposes of hiring them.
7.3 Except for activities expressly permitted by the prior written approval
of the Board of Directors of the Company, during the term of this Agreement, the
Executive will not: (a) engage in business independent of the Executive's
employment by the Company that requires any substantial portion of the
Executive's time; (b) serve as an officer, general partner or member in any for-
profit corporation, partnership or firm; (c) serve as a director of any
corporation, partnership or firm having the Business as its principal
enterprise; or (d) directly, indirectly or through any Affiliate, invest in,
participate in or acquire an interest in any entity engaged in the Business. For
purposes of this Agreement, the terms: (i) "Affiliate" means as to any Person,
each other Person that directly or indirectly (through one (1) or more
intermediaries) controls, is controlled by or is under common control with such
person; and (ii) "Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust, associate (as
defined in regulations promulgated by the Securities Exchange Commission) or
other legally recognizable entity. The limitation in this paragraph will not
prohibit any investment by the Executive in securities that are listed on a
public exchange or the National Association of Securities Dealers Automated
Quotation National Market System and issued by a company, firm, corporation,
partnership, trust or other entity involved in the Business or otherwise.
7.4 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 7.1, 7.2 and 8 of this Agreement is necessary,
fundamental, and required for the protection of the Company's business; (ii)
such relate to matters which are of a special, unique, and extraordinary
character that gives each of them a special, unique, and extraordinary value;
and (iii) a breach of any such covenant or restriction will result in
irreparable harm and damage to the Company which cannot be compensated
adequately by a monetary award. Accordingly, it is expressly agreed that, in
addition to all other remedies available at law or in equity, and
notwithstanding anything to the contrary in Section 10 below, the
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<PAGE>
Company will be entitled to the immediate remedy of a temporary restraining
order, preliminary injunction, or such other form of injunctive or equitable
relief as may be used by any court of competent jurisdiction to restrain or
enjoin any of the parties hereto from breaching any such covenant or
restriction, or otherwise specifically to enforce the provisions contained in
Sections 7.1, 7.2 and 8 of this Agreement.
8. Proprietary Matters. Executive expressly understands and agrees that any
-------------------
and all improvements, inventions, discoveries, processes, or know-how that are
generated or conceived by Executive during the term of this Agreement, whether
so generated or conceived during Executive's regular working hours or otherwise,
will be the sole and exclusive property of the Company, and Executive will,
whenever requested to do so by the Company (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which the Company may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce
and defend patents, copyrights, trade names or trademarks of the United States
or of foreign countries for said improvements, inventions, discoveries,
processes, or know-how, or in order to assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in
and to said improvements, inventions, discoveries, processes, know-how,
applications, patents, copyrights, trade names or trademarks.
9. Key-Person Insurance. Executive agrees to make himself available and to
--------------------
undergo, at the Company's request and expense, any physical examination or other
procedure necessary to allow the Company to obtain a key-person insurance policy
on Executive. If the Company obtains such policy, it will maintain the policy at
its expense and all proceeds will be the sole property of the Company.
10. Resolution of Disputes. The parties will attempt in good faith promptly
----------------------
by negotiations to resolve any dispute or controversy arising out of or relating
to this Agreement or to the employment or termination of Executive by the
Company. If a party intends to be accompanied at a negotiation meeting by an
attorney, the other party will be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
11. Miscellaneous.
-------------
11.1 Governing Law; Interpretation. This Agreement will be governed by the
substantive laws of the State of New York applicable to contracts entered into
and fully performed in such jurisdiction. The
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<PAGE>
headings and captions of the Sections of this Agreement are for convenience only
and in no way define, limit or extend the scope or intent of this Agreement or
any provision hereof. This Agreement will be construed as a whole, according to
its fair meaning, and not in favor of or against any party, regardless of which
party may have initially drafted certain provisions set forth herein.
11.2 Assignment. This Agreement is personal to Executive and he may not
----------
assign any of his rights or delegate any of his obligations hereunder without
first obtaining the prior written consent of the Board of Directors of the
Company.
11.3 Notices. Any notice, request, claim or other communication required or
-------
permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by certified mail, postage and
certification prepaid, to Executive at his residence (as noted in the Company's
records), or to the Company at its address as set forth below its signature on
the signature page of this Agreement, or to such other address or addresses as
either party may have furnished to the other in writing in accordance herewith.
11.4 Severability. In the event any court of competent jurisdiction shall
------------
determine that the scope, time or territorial restrictions of any provision of
this Agreement are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed. The remaining
provisions of this Agreement will remain in full force and effect unless the
result would be manifestly unjust or would deprive either party of the benefit
of its bargain.
11.5 Entire Agreement; Amendments. This Agreement and any other exhibits
----------------------------
and attachments hereto constitutes the final and complete expression of all of
the terms of the understanding and agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement replaces and supersedes
any and all prior or contemporaneous negotiations, communications,
understandings, obligations, commitments, agreements or contracts, whether
written or oral, between the parties respecting the subject matter hereof.
Except as provided in Section 11.4 above, this Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by both parties.
11.6 Attorneys' Fees. If it becomes necessary for any party to initiate
legal action or any other proceeding to enforce, defend or construe such party's
rights or obligations under this Agreement, the prevailing party will
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<PAGE>
be entitled to its reasonable costs and expenses, including attorneys' fees,
incurred in connection with such action or proceeding.
12. Executive Acknowledgment. Executive acknowledges that he has been
------------------------
given the opportunity to consult with legal counsel concerning the rights and
obligations arising under this Agreement, that he has read and understands each
and every provision of this Agreement, and that he is fully aware of the legal
effect and implications of this Agreement.
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<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Company: Executive:
United Road Services, Inc. Ross Berner
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
Address:_______________________ Address:_______________________
_______________________ _______________________
Fax: _______________________ Fax: _______________________
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EXHIBIT 10.6
Executive Employment Agreement
------------------------------
This Executive Employment Agreement ("Agreement") is made and entered into as
of January ___, 1998 (the "Effective Date") by and between United Road Services,
Inc., a Delaware corporation (the "Company") and Allan D. Pass, an individual
resident of the State of Pennsylvania ("Executive"), with reference to the
following:
B a c k g r o u n d
A. The Company is a newly formed entity that intends to pursue
consolidation opportunities in the towing services business (the
"Business").
B. Executive has previously served in senior management capacities in
businesses similar to the Business.
C. The Company now desires to retain the full-time services of Executive as
Chief Operating Officer and Senior Vice President of the Company, and
Executive is willing to be employed by the Company in that capacity on
the terms and conditions set forth in this Agreement.
Now Therefore, the Company and Executive hereby agree as follows:
1. Employment. The Company hereby employs Executive on the terms set forth
----------
herein and Executive hereby accepts such employment commencing on the Effective
Date for a term of three years (the "Employment Term"), unless sooner terminated
under Section 6 below.
2. Duties. During the period of his employment with the Company hereunder,
------
Executive will be employed as Chief Operating Officer and Senior Vice President
of the Company. Executive will:
(a) devote his full business time, ability, knowledge and attention, and
give his best effort and skill solely to the Company's business affairs and
interests;
(b) perform such services and assume such duties and responsibilities
appropriate to the positions identified above as well as those which may from
time to time be reasonably assigned to him by the Chief Executive Officer of the
Company or by such other person to whom he may be directed to report by the
Chief Executive Officer or the Board of Directors of the Company; and
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(c) in all respects use his best efforts to further, enhance and develop
the Company's business affairs, interests and welfare.
3. Compensation. In consideration of Executive's services to the Company
------------
during the Employment Term, commencing upon the consummation of the Initial
Public Offering, the Company will pay Executive a gross base salary of $150,000
per annum during the Employment Term, subject to the review by the Company's
underwriters at or around the time of IPO. Executive's base salary will be paid
in equal installments (pro rated for portions of a pay period) on the Company's
regular pay days and the Company will withhold from such compensation all
applicable federal and state income, social security, and disability and other
taxes as required by applicable laws. The Company may also pay Executive such
bonuses as are determined from time to time by the Board of Directors. For
purposes of this Agreement, "Initial Public Offering" or "IPO" means the
Company's first firm commitment underwritten offering of its securities pursuant
to a registration statement under the Securities Act of 1933, as amended.
4. Change of Control. In the event of any Change of Control of the
-----------------
Company pursuant to which Executive's employment is terminated either (i) by
Executive or (ii) by the Company (or a successor entity), in either case within
ninety (90) days following the effective date of such Change of Control, then
(i) any and all of Executive's stock options that are unvested as of the
effective date of such Change of Control will become vested immediately prior to
such event and (ii) Executive will receive from the Company an aggregate payment
equal to three (3) times his gross base salary, payable in accordance with the
provisions of Section 3 above; provided however, that in the event that the
Company determines, in its sole discretion, that any portion of the same
constitutes an excess parachute payment under ss280G of the Internal Revenue
Code of 1986, as amended, then the Company will have no obligation to provide
such portion to the Executive. For purposes of this Agreement, a "Change of
Control" means (a) the sale of all or substantially all of the assets of the
Company to any person or entity that, prior to such sale, did not control, was
not under common control with, or was not controlled by, the Company, or (b) a
merger or consolidation or other reorganization in which the Company is not the
surviving entity or becomes owned entirely by another entity, unless at least
fifty percent (50%) of the outstanding voting securities of the surviving or
parent corporation, as the case may be, immediately following such transaction
are beneficially held by such persons and entities in the same proportion as
such persons and entities beneficially held the outstanding voting securities of
the Company immediately prior to such transaction, or (c) the sale or other
change of beneficial ownership of at least fifty percent (50%) of the
outstanding voting securities of the Company to any person or "group" as that
term is defined under the Securities Exchange Act of 1934, as amended; it being
agreed, in any event, that the
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issuances of shares to the stockholders of the founding companies consolidating
with the Company at the time of the IPO, and the issuance of shares in the IPO,
shall in no event constitute a Change of Control.
5. Benefits and Reimbursements.
---------------------------
5.1 Executive will, during the Employment Term, have the right to receive
such benefits as are generally made available to full-time executive officers of
the Company, including the right to participate in any retirement plan or
executive bonus plan that the Company may create. In addition, or inclusive of
such benefits, the Company will provide Executive with the following:
(a) the opportunity to apply for coverage under the Company's medical,
life and disability plans, if any. If the Executive is accepted for coverage
under such plans, the Company will provide to Executive and his immediate
family such coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to time.
(b) in addition to normal holidays recognized by the Company, Executive
will be entitled to three weeks paid vacation annually, provided that any
vacation may be taken by Executive at any time Executive deems appropriate,
upon consultation with the Board of Directors, which may determine that the
best interests of the Company require otherwise.
5.2 The Company will reimburse Executive for travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his duties
hereunder, provided that all such expenses will be reimbursed only (i) upon the
presentation by Executive to the Company of such documentation as may be
reasonably necessary to substantiate that all such expenses were incurred in the
performance of his duties, and (ii) if such expenses are consistent with all
policies of the Company in effect from time to time as to the kind and amount of
such expenses.
6. Termination of Employment.
-------------------------
6.1 Expiration of the Term of Agreement. This Agreement will terminate
-----------------------------------
automatically upon the expiration of the Employment Term. On or about three
months prior to the date of such termination, the Company will provide Executive
with written notice of non-renewal of this Agreement.
6.2 Death or Permanent Disability of Executive. This Agreement will
terminate upon the death or permanent disability of Executive. Executive will be
deemed permanently disabled for the purpose of this Agreement if,
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in the good faith determination of the Board of Directors, based on sound
medical advice, Executive has become physically or mentally incapable of
performing his duties hereunder for a continuous period of one hundred eighty
(180) days, in which event Executive will be deemed permanently disabled upon
the expiration of such one hundred eighty (180) day period.
6.3 Executive's Discharge for Cause. The Company will have the right to
-------------------------------
terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written notice setting forth with particularity the facts and
circumstances constituting such Cause. For such purposes, "Cause" means the
occurrence of one or more of the following: (i) the commission by Executive of
any act materially detrimental to the Company, including fraud, embezzlement,
theft, bad faith, gross negligence, recklessness or willful misconduct; (ii)
incompetence or repeated failure or refusal to perform the duties required by
this Agreement and as may be assigned to Executive by the Chief Executive
Officer of the Company or by such other person to whom Executive is directed to
report from time to time by the Chief Executive Officer or the Board of
Directors of the Company; (iii) conviction of a felony or of any crime of moral
turpitude to the extent materially detrimental to the Company; (iv) any material
misrepresentation by Executive to the Company regarding the operation of the
business; or (v) breach of any covenant of this Agreement, provided that the
action or conduct described in clauses (ii) or (v) above will constitute "Cause"
only if such action or conduct continues after the Company has provided
Executive with written notice thereof and a reasonable opportunity (to be not
less than 30 days) to cure the same.
6.4 The Company's Right to Terminate At Will. Subject to the payment to
----------------------------------------
Executive of the applicable severance payments as provided in Section 6.5 below,
the Company will have the right (in addition to its right of termination under
Section 6.1 above), exercisable at any time during the term of this Agreement,
to terminate Executive's employment with the Company without "Cause" (as defined
in Section 6.3 above), immediately upon written notice to Executive.
6.5 Compensation Upon Termination.
-----------------------------
(a) Upon termination of Executive's employment pursuant to this Section
6, Executive will be entitled to only: (i) the compensation provided for in
Section 3 above for the period of time ending with the date of termination; (ii)
compensation for any unused vacation that Executive may have accrued, as well as
all earned benefits, up to and including the date of termination; (iii) "COBRA"
benefits to the extent required by applicable law; and (iv) reimbursement for
such expenses as Executive may have properly incurred on behalf of the Company
as provided in Section 6.2 above prior to the date of termination.
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<PAGE>
(b) If (i) the Company terminates Executive's employment pursuant to
Section 6.4 above, or (ii) Edward T. Sheehan ceases to be employed by the
Company for any reason and Executive voluntarily terminates his employment with
the Company within 6 months thereafter, in addition to the amounts payable in
Section 6.5(a) above, Executive will be entitled to receive a severance payment
in an amount equal to the base salary paid to Executive by the Company pursuant
to Section 3 above for a period of two years. Notwithstanding anything to the
contrary in this Section 6.5(b), Executive's severance payment from the Company
immediately will cease if Executive accepts new employment with any person,
persons, company, partnership, corporation or business of whatever nature.
(c) The Company will pay the severance payment described in Section
6.5(b) above in periodic payments, in accordance with the payment schedule set
forth in Section 3 above.
(d) The payments set forth in this Section 6.5 will fully discharge all
responsibilities of the Company to Executive under this Agreement or relating to
or arising out of the termination of Executive's employment.
7. Unfair Competition by Executive.
-------------------------------
7.1 Executive agrees that all trade secrets, confidential or proprietary
information with respect to the activities and businesses of the Company,
including, without limitation, personnel information, secret processes, know-
how, customer lists, databases, ideas, techniques, processes, inventions
(whether patentable or not), and other technical plans, business plans,
marketing plans, product plans, forecasts, contacts, strategies and information
(collectively "Proprietary Information") which were learned by Executive in the
course of his employment by the Company, and any other Proprietary Information
received, developed or learned by Executive hereafter in the course of his
future employment by or in association with the Company, are confidential and
will be kept and held in confidence and trust as a fiduciary by Executive.
Executive will not use or disclose Proprietary Information of the Company except
as necessary in the normal course of the business of the Company for its sole
and exclusive benefit, unless Executive is compelled so to disclose under
process of law, in which case Executive will first notify the Company promptly
after receipt of a demand to so disclose.
7.2 During the term of this Agreement and for a period of one year
following its termination for any reason, directly or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, Executive will not:
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<PAGE>
(a) engage, as an officer, director, shareholder, owner, partner, joint
venturer, financier, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
corporation, partnership, firm or other entity engaged in the Business that is
within 100 miles of the principal places of business of the Company or any of
the Company's subsidiaries, or of any geographic location in which Executive has
represented the interests of the Company or any of its subsidiaries (the
"Territory");
(b) call upon any prospective acquisition candidate engaged in the
Business on Executive's own behalf or on behalf of any competitor of the Company
or any of its subsidiaries, which candidate was either called upon by the
Company (including its subsidiaries) for the purpose of acquiring such entity.
(c) contact or solicit any employees of the Company or its subsidiaries
for the purposes of hiring them.
7.3 Except for activities expressly permitted by the prior written approval
of the Board of Directors of the Company, during the term of this Agreement, the
Executive will not: (a) engage in business independent of the Executive's
employment by the Company that requires any substantial portion of the
Executive's time; (b) serve as an officer, general partner or member in any for-
profit corporation, partnership or firm; (c) serve as a director of any
corporation, partnership or firm having the Business as its principal
enterprise; or (d) directly, indirectly or through any Affiliate, invest in,
participate in or acquire an interest in any entity engaged in the Business. For
purposes of this Agreement, the terms: (i) "Affiliate" means as to any Person,
each other Person that directly or indirectly (through one (1) or more
intermediaries) controls, is controlled by or is under common control with such
person; and (ii) "Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust, associate (as
defined in regulations promulgated by the Securities Exchange Commission) or
other legally recognizable entity. The limitation in this paragraph will not
prohibit any investment by the Executive in securities that are listed on a
public exchange or the National Association of Securities Dealers Automated
Quotation National Market System and issued by a company, firm, corporation,
partnership, trust or other entity involved in the Business or otherwise.
7.4 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 7.1, 7.2 and 8 of this Agreement is necessary,
fundamental, and required for the protection of the Company's business; (ii)
such relate to matters which are of a special, unique, and extraordinary
character that gives each of them a special, unique, and extraordinary value;
and (iii) a breach of any such covenant or restriction will
-6-
<PAGE>
result in irreparable harm and damage to the Company which cannot be compensated
adequately by a monetary award. Accordingly, it is expressly agreed that, in
addition to all other remedies available at law or in equity, and
notwithstanding anything to the contrary in Section 10 below, the Company will
be entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable relief as
may be used by any court of competent jurisdiction to restrain or enjoin any of
the parties hereto from breaching any such covenant or restriction, or otherwise
specifically to enforce the provisions contained in Sections 7.1, 7.2 and 8 of
this Agreement.
8. Proprietary Matters. Executive expressly understands and agrees that any
-------------------
and all improvements, inventions, discoveries, processes, or know-how that are
generated or conceived by Executive during the term of this Agreement, whether
so generated or conceived during Executive's regular working hours or otherwise,
will be the sole and exclusive property of the Company, and Executive will,
whenever requested to do so by the Company (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which the Company may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce
and defend patents, copyrights, trade names or trademarks of the United States
or of foreign countries for said improvements, inventions, discoveries,
processes, or know-how, or in order to assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in
and to said improvements, inventions, discoveries, processes, know-how,
applications, patents, copyrights, trade names or trademarks.
9. Key-Person Insurance. Executive agrees to make himself available and to
--------------------
undergo, at the Company's request and expense, any physical examination or other
procedure necessary to allow the Company to obtain a key-person insurance policy
on Executive. If the Company obtains such policy, it will maintain the policy at
its expense and all proceeds will be the sole property of the Company.
10. Resolution of Disputes. The parties will attempt in good faith promptly
----------------------
by negotiations to resolve any dispute or controversy arising out of or relating
to this Agreement or to the employment or termination of Executive by the
Company. If a party intends to be accompanied at a negotiation meeting by an
attorney, the other party will be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
11. Miscellaneous.
-------------
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<PAGE>
11.1 Governing Law; Interpretation. This Agreement will be governed by the
-----------------------------
substantive laws of the State of New York applicable to contracts entered into
and fully performed in such jurisdiction. The headings and captions of the
Sections of this Agreement are for convenience only and in no way define, limit
or extend the scope or intent of this Agreement or any provision hereof. This
Agreement will be construed as a whole, according to its fair meaning, and not
in favor of or against any party, regardless of which party may have initially
drafted certain provisions set forth herein.
11.2 Assignment. This Agreement is personal to Executive and he may not
----------
assign any of his rights or delegate any of his obligations hereunder without
first obtaining the prior written consent of the Board of Directors of the
Company.
11.3 Notices. Any notice, request, claim or other communication required or
-------
permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by certified mail, postage and
certification prepaid, to Executive at his residence (as noted in the Company's
records), or to the Company at its address as set forth below its signature on
the signature page of this Agreement, or to such other address or addresses as
either party may have furnished to the other in writing in accordance herewith.
11.4 Severability. In the event any court of competent jurisdiction shall
------------
determine that the scope, time or territorial restrictions of any provision of
this Agreement are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed. The remaining
provisions of this Agreement will remain in full force and effect unless the
result would be manifestly unjust or would deprive either party of the benefit
of its bargain.
11.5 Entire Agreement; Amendments. This Agreement and any other exhibits
----------------------------
and attachments hereto constitutes the final and complete expression of all of
the terms of the understanding and agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement replaces and supersedes
any and all prior or contemporaneous negotiations, communications,
understandings, obligations, commitments, agreements or contracts, whether
written or oral, between the parties respecting the subject matter hereof.
Except as provided in Section 11.4 above, this Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by both parties.
-8-
<PAGE>
11.6 Attorneys' Fees. If it becomes necessary for any party to initiate
---------------
legal action or any other proceeding to enforce, defend or construe such party's
rights or obligations under this Agreement, the prevailing party will be
entitled to its reasonable costs and expenses, including attorneys' fees,
incurred in connection with such action or proceeding.
12. Executive Acknowledgment. Executive acknowledges that he has been given
------------------------
the opportunity to consult with legal counsel concerning the rights and
obligations arising under this Agreement, that he has read and understands each
and every provision of this Agreement, and that he is fully aware of the legal
effect and implications of this Agreement.
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<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Company: Executive:
INITED ROAD SERVICES, INC. ALLAN D. PASS
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
Address:_______________________ Address:_______________________
_______________________ _______________________
Fax: _______________________ Fax: _______________________
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<PAGE>
EXHIBIT 10.7
Executive Employment Agreement
------------------------------
This Executive Employment Agreement ("Agreement") is made and entered into as
of _____________, 1998 (the "Effective Date") by and between United Road
Services, Inc., a Delaware corporation (the "Company") and Donald Marr, an
individual resident of the State of New York ("Executive"), with reference to
the following:
B a c k g r o u n d
A. The Company is a newly formed entity that intends to pursue
consolidation opportunities in the towing services business (the
"Business").
B. Executive has previously served in senior management capacities in
businesses similar to the Business.
C. The Company now desires to retain the full-time services of Executive as
Chief Financial Officer of the Company, and Executive is willing to be
employed by the Company in that capacity on the terms and conditions set
forth in this Agreement.
Now Therefore, the Company and Executive hereby agree as follows:
1. Employment. The Company hereby employs Executive on the terms set forth
----------
herein and Executive hereby accepts such employment commencing on the Effective
Date for a term of three years (the "Employment Term"), unless sooner terminated
under Section 6 below.
2. Duties. During the period of his employment with the Company hereunder,
------
Executive will be employed as Chief Financial Officer of the Company. Executive
will:
(a) devote his full business time, ability, knowledge and attention, and
give his best effort and skill solely to the Company's business affairs and
interests;
(b) perform such services and assume such duties and responsibilities
appropriate to the positions identified above as well as those which may from
time to time be reasonably assigned to him by the Chief Executive Officer of the
Company or by such other person to whom he may be directed to report by the
Chief Executive Officer or the Board of Directors of the Company; and
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<PAGE>
(c) in all respects use his best efforts to further, enhance and develop
the Company's business affairs, interests and welfare.
3. Compensation. In consideration of Executive's services to the Company
------------
during the Employment Term, the Company will pay Executive a gross base salary
of $125,000 per annum during the Employment Term, subject to review by the
Company's underwriters at or around the time of IPO. Executive's base salary
will be paid in equal installments (pro rated for portions of a pay period) on
the Company's regular pay days and the Company will withhold from such
compensation all applicable federal and state income, social security, and
disability and other taxes as required by applicable laws. The Company may also
pay Executive such bonuses as are determined from time to time by the Board of
Directors. For purposes of this Agreement, "Initial Public Offering" or "IPO"
means the Company's first firm commitment underwritten offering of its
securities pursuant to a registration statement under the Securities Act of
1933, as amended.
4. Change of Control. In the event of any Change of Control of the Company
-----------------
pursuant to which Executive's employment is terminated either (i) by Executive
or (ii) by the Company (or a successor entity), in either case within ninety
(90) days following the effective date of such Change of Control, then (i) any
and all of Executive's stock options that are unvested as of the effective date
of such Change of Control will become vested immediately prior to such event and
(ii) Executive will receive from the Company an aggregate payment equal to three
(3) times his gross base salary, payable in accordance with the provisions of
Section 3 above; provided however, that in the event that the Company
determines, in its sole discretion, that any portion of the same constitutes an
excess parachute payment under ss280G of the Internal Revenue Code of 1986, as
amended, then the Company will have no obligation to provide such portion to the
Executive. For purposes of this Agreement, a "Change of Control" means (a) the
sale of all or substantially all of the assets of the Company to any person or
entity that, prior to such sale, did not control, was not under common control
with, or was not controlled by, the Company, or (b) a merger or consolidation or
other reorganization in which the Company is not the surviving entity or becomes
owned entirely by another entity, unless at least fifty percent (50%) of the
outstanding voting securities of the surviving or parent corporation, as the
case may be, immediately following such transaction are beneficially held by
such persons and entities in the same proportion as such persons and entities
beneficially held the outstanding voting securities of the Company immediately
prior to such transaction, or (c) the sale or other change of beneficial
ownership of at least fifty percent (50%) of the outstanding voting securities
of the Company to any person or "group" as that term is defined under the
Securities Exchange Act of 1934, as amended; it being agreed, in any event, that
the issuances of shares to the stockholders of the founding companies
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<PAGE>
consolidating with the Company at the time of the IPO, and the issuance of
shares in the IPO, shall in no event constitute a Change of Control.
5. Benefits and Reimbursements.
---------------------------
5.1 Executive will, during the Employment Term, have the right to receive
such benefits as are generally made available to full-time executive officers of
the Company, including the right to participate in any retirement plan or
executive bonus plan that the Company may create. In addition, or inclusive of
such benefits, the Company will provide Executive with the following:
(a) the opportunity to apply for coverage under the Company's medical,
life and disability plans, if any. If the Executive is accepted for coverage
under such plans, the Company will provide to Executive and his immediate
family such coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to time.
(b) in addition to normal holidays recognized by the Company, Executive
will be entitled to three weeks paid vacation annually, provided that any
vacation may be taken by Executive at any time Executive deems appropriate,
upon consultation with the Board of Directors, which may determine that the
best interests of the Company require otherwise.
5.2 The Company will reimburse Executive for travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his duties
hereunder, provided that all such expenses will be reimbursed only (i) upon the
presentation by Executive to the Company of such documentation as may be
reasonably necessary to substantiate that all such expenses were incurred in the
performance of his duties, and (ii) if such expenses are consistent with all
policies of the Company in effect from time to time as to the kind and amount of
such expenses.
6.Termination of Employment.
-------------------------
6.1 Expiration of the Term of Agreement. This Agreement will terminate
-----------------------------------
automatically upon the expiration of the Employment Term. On or about three
months prior to the date of such termination, the Company will provide Executive
with written notice of non-renewal of this Agreement.
6.2 Death or Permanent Disability of Executive. This Agreement will
------------------------------------------
terminate upon the death or permanent disability of Executive. Executive will be
deemed permanently disabled for the purpose of this Agreement if, in the good
faith determination of the Board of Directors, based on sound medical advice,
Executive has become physically or mentally incapable of
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<PAGE>
performing his duties hereunder for a continuous period of one hundred eighty
(180) days, in which event Executive will be deemed permanently disabled upon
the expiration of such one hundred eighty (180) day period.
6.3 Executive's Discharge for Cause. The Company will have the right to
-------------------------------
terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written notice setting forth with particularity the facts and
circumstances constituting such Cause. For such purposes, "Cause" means the
occurrence of one or more of the following: (i) the commission by Executive of
any act materially detrimental to the Company, including fraud, embezzlement,
theft, bad faith, gross negligence, recklessness or willful misconduct; (ii)
incompetence or repeated failure or refusal to perform the duties required by
this Agreement and as may be assigned to Executive by the Chief Executive
Officer of the Company or by such other person to whom Executive is directed to
report from time to time by the Chief Executive Officer or the Board of
Directors of the Company; (iii) conviction of a felony or of any crime of moral
turpitude to the extent materially detrimental to the Company; (iv) any material
misrepresentation by Executive to the Company regarding the operation of the
business; or (v) breach of any covenant of this Agreement, provided that the
action or conduct described in clauses (ii) or (v) above will constitute "Cause"
only if such action or conduct continues after the Company has provided
Executive with written notice thereof and a reasonable opportunity (to be not
less than 30 days) to cure the same.
6.4 The Company's Right to Terminate At Will. Subject to the payment to
----------------------------------------
Executive of the applicable severance payments as provided in Section 6.5 below,
the Company will have the right (in addition to its right of termination under
Section 6.1 above), exercisable at any time during the term of this Agreement,
to terminate Executive's employment with the Company without "Cause" (as defined
in Section 6.3 above), immediately upon written notice to Executive.
6.5 Compensation Upon Termination.
-----------------------------
(a) Upon termination of Executive's employment pursuant to this Section
6, Executive will be entitled to only: (i) the compensation provided for in
Section 3 above for the period of time ending with the date of termination; (ii)
compensation for any unused vacation that Executive may have accrued, as well as
all earned benefits, up to and including the date of termination; (iii) "COBRA"
benefits to the extent required by applicable law; and (iv) reimbursement for
such expenses as Executive may have properly incurred on behalf of the Company
as provided in Section 6.2 above prior to the date of termination.
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<PAGE>
(b) If (i) the Company terminates Executive's employment pursuant to
Section 6.4 above or (ii) Edward T. Sheehan ceases to be employed by the Company
for any reason and Executive voluntarily terminates his employment with the
Company within 6 months thereafter, in addition to the amounts payable in
Section 6.5(a) above, Executive will be entitled to receive a severance payment
in an amount equal to the base salary paid to Executive by the Company pursuant
to Section 3 above for a period of one year. Notwithstanding anything to the
contrary in this Section 6.5(b), Executive's severance payment from the Company
immediately will cease if Executive accepts new employment with any person,
persons, company, partnership, corporation or business of whatever nature.
(c) The Company will pay the severance payment described in Section
6.5(b) above in periodic payments, in accordance with the payment schedule set
forth in Section 3 above.
(d) The payments set forth in this Section 6.5 will fully discharge all
responsibilities of the Company to Executive under this Agreement or relating to
or arising out of the termination of Executive's employment.
7. Unfair Competition by Executive.
-------------------------------
7.1 Executive agrees that all trade secrets, confidential or proprietary
information with respect to the activities and businesses of the Company,
including, without limitation, personnel information, secret processes, know-
how, customer lists, databases, ideas, techniques, processes, inventions
(whether patentable or not), and other technical plans, business plans,
marketing plans, product plans, forecasts, contacts, strategies and information
(collectively "Proprietary Information") which were learned by Executive in the
course of his employment by the Company, and any other Proprietary Information
received, developed or learned by Executive hereafter in the course of his
future employment by or in association with the Company, are confidential and
will be kept and held in confidence and trust as a fiduciary by Executive.
Executive will not use or disclose Proprietary Information of the Company except
as necessary in the normal course of the business of the Company for its sole
and exclusive benefit, unless Executive is compelled so to disclose under
process of law, in which case Executive will first notify the Company promptly
after receipt of a demand to so disclose.
-5-
<PAGE>
7.2 During the term of this Agreement and for a period of one year
following its termination for any reason, directly or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, Executive will not:
(a) engage, as an officer, director, shareholder, owner, partner, joint
venturer, financier, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
corporation, partnership, firm or other entity engaged in the Business that is
within 100 miles of the principal places of business of the Company or any of
the Company's subsidiaries, or of any geographic location in which Executive has
represented the interests of the Company or any of its subsidiaries (the
"Territory");
(b) call upon any prospective acquisition candidate engaged in the
Business on Executive's own behalf or on behalf of any competitor of the Company
or any of its subsidiaries, which candidate was either called upon by the
Company (including its subsidiaries) for the purpose of acquiring such entity.
(c) contact or solicit any employees of the Company or its subsidiaries
for the purposes of hiring them.
7.3 Except for activities expressly permitted by the prior written approval
of the Board of Directors of the Company, during the term of this Agreement, the
Executive will not: (a) engage in business independent of the Executive's
employment by the Company that requires any substantial portion of the
Executive's time; (b) serve as an officer, general partner or member in any for-
profit corporation, partnership or firm; (c) serve as a director of any
corporation, partnership or firm having the Business as its principal
enterprise; or (d) directly, indirectly or through any Affiliate, invest in,
participate in or acquire an interest in any entity engaged in the Business. For
purposes of this Agreement, the terms: (i) "Affiliate" means as to any Person,
each other Person that directly or indirectly (through one (1) or more
intermediaries) controls, is controlled by or is under common control with such
person; and (ii) "Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust, associate (as
defined in regulations promulgated by the Securities Exchange Commission) or
other legally recognizable entity. The limitation in this paragraph will not
prohibit any investment by the Executive in securities that are listed on a
public exchange or the National Association of Securities Dealers Automated
Quotation National Market System and issued by a company, firm, corporation,
partnership, trust or other entity involved in the Business or otherwise.
-6-
<PAGE>
7.4 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 7.1, 7.2 and 8 of this Agreement is necessary,
fundamental, and required for the protection of the Company's business; (ii)
such relate to matters which are of a special, unique, and extraordinary
character that gives each of them a special, unique, and extraordinary value;
and (iii) a breach of any such covenant or restriction will result in
irreparable harm and damage to the Company which cannot be compensated
adequately by a monetary award. Accordingly, it is expressly agreed that, in
addition to all other remedies available at law or in equity, and
notwithstanding anything to the contrary in Section 10 below, the Company will
be entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable relief as
may be used by any court of competent jurisdiction to restrain or enjoin any of
the parties hereto from breaching any such covenant or restriction, or otherwise
specifically to enforce the provisions contained in Sections 7.1, 7.2 and 8 of
this Agreement.
8. Proprietary Matters. Executive expressly understands and agrees that any
-------------------
and all improvements, inventions, discoveries, processes, or know-how that are
generated or conceived by Executive during the term of this Agreement, whether
so generated or conceived during Executive's regular working hours or otherwise,
will be the sole and exclusive property of the Company, and Executive will,
whenever requested to do so by the Company (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which the Company may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce
and defend patents, copyrights, trade names or trademarks of the United States
or of foreign countries for said improvements, inventions, discoveries,
processes, or know-how, or in order to assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in
and to said improvements, inventions, discoveries, processes, know-how,
applications, patents, copyrights, trade names or trademarks.
9. Key-Person Insurance. Executive agrees to make himself available and to
--------------------
undergo, at the Company's request and expense, any physical examination or other
procedure necessary to allow the Company to obtain a key-person insurance policy
on Executive. If the Company obtains such policy, it will maintain the policy at
its expense and all proceeds will be the sole property of the Company.
10. Resolution of Disputes. The parties will attempt in good faith promptly
----------------------
by negotiations to resolve any dispute or controversy arising out of or relating
to this Agreement or to the employment or termination of Executive by the
Company. If a party intends to be accompanied at a negotiation meeting by an
attorney, the other party will be given at least
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<PAGE>
three working days' notice of such intention and may also be accompanied by an
attorney. All negotiations pursuant to this clause are confidential and will be
treated as compromise and settlement negotiations for purposes of the Federal
Rules of Evidence and state rules of evidence.
11. Miscellaneous.
-------------
11.1 Governing Law; Interpretation. This Agreement will be governed by the
-----------------------------
substantive laws of the State of New York applicable to contracts entered into
and fully performed in such jurisdiction. The headings and captions of the
Sections of this Agreement are for convenience only and in no way define, limit
or extend the scope or intent of this Agreement or any provision hereof. This
Agreement will be construed as a whole, according to its fair meaning, and not
in favor of or against any party, regardless of which party may have initially
drafted certain provisions set forth herein.
11.2 Assignment. This Agreement is personal to Executive and he may not
----------
assign any of his rights or delegate any of his obligations hereunder without
first obtaining the prior written consent of the Board of Directors of the
Company.
11.3 Notices. Any notice, request, claim or other communication required or
-------
permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by certified mail, postage and
certification prepaid, to Executive at his residence (as noted in the Company's
records), or to the Company at its address as set forth below its signature on
the signature page of this Agreement, or to such other address or addresses as
either party may have furnished to the other in writing in accordance herewith.
11.4 Severability. In the event any court of competent jurisdiction shall
------------
determine that the scope, time or territorial restrictions of any provision of
this Agreement are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed. The remaining
provisions of this Agreement will remain in full force and effect unless the
result would be manifestly unjust or would deprive either party of the benefit
of its bargain.
11.5 Entire Agreement; Amendments. This Agreement and any other exhibits
----------------------------
and attachments hereto constitutes the final and complete expression of all of
the terms of the understanding and agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement replaces and supersedes
any and all prior or contemporaneous negotiations, communications,
understandings, obligations, commitments,
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<PAGE>
agreements or contracts, whether written or oral, between the parties respecting
the subject matter hereof. Except as provided in Section 11.4 above, this
Agreement may not be modified, amended, altered or supplemented except by means
of the execution and delivery of a written instrument mutually executed by both
parties.
11.6 Attorneys' Fees. If it becomes necessary for any party to initiate
---------------
legal action or any other proceeding to enforce, defend or construe such party's
rights or obligations under this Agreement, the prevailing party will be
entitled to its reasonable costs and expenses, including attorneys' fees,
incurred in connection with such action or proceeding.
12. EXECUTIVE ACKNOWLEDGMENT. EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN GIVEN
------------------------
THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL CONCERNING THE RIGHTS AND
OBLIGATIONS ARISING UNDER THIS AGREEMENT, THAT HE HAS READ AND UNDERSTANDS EACH
AND EVERY PROVISION OF THIS AGREEMENT, AND THAT HE IS FULLY AWARE OF THE LEGAL
EFFECT AND IMPLICATIONS OF THIS AGREEMENT.
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<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Company: Executive:
UNITED ROAD SERVICES, INC. DONALD MARR
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
Address:_______________________ Address:_______________________
_______________________ _______________________
Fax: _______________________ Fax: _______________________
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<PAGE>
EXHIBIT 10.11
TOWING AMERICA, INC.
--------------------
PROMISSORY NOTE
---------------
$1,000,000.00 October -, 1997
FOR VALUE RECEIVED, the undersigned, Towing America, Inc., a Delaware
corporation ("Borrower"), promises to pay to the order of Mark McKinney
("Noteholder") in lawful money of the United States of America and in
immediately available funds, the principal amount of ONE MILLION AND 00/100
DOLLARS ($1,000,000.00), or such lesser amount as shall equal the aggregate
unpaid principal amount of the advances (the "Advances") made by the Noteholder
to the Borrower under this Note, together with interest on the unpaid principal
amount of each such Advance. Interest shall be calculated from the date of each
such Advance until paid at the rate of eight and one-half percent (8.5%) per
annum.
Each Advance hereunder shall be at the sole discretion of the Noteholder.
Borrower will repay this loan in one payment of all outstanding principal plus
all accrued unpaid interest on the earlier of (a) demand or (b) upon the
consummation of the Company's first firm commitment underwritten offering of its
securities pursuant to a registration statement under the Securities Act of
1933, as amended.
This Note may be prepaid, in its entirety (including the principal sum and
interest accrued to the date of payment) without the prior written consent of
Noteholder.
Payments by Borrower shall be applied first to any and all accrued interest
through the payment date and second to the principal remaining due hereunder or
upon conversion hereof.
This Note evidences a straight line of credit. Once the $1,000,000.00 has
been advanced, Borrower is not entitled to further Advances. Advances under this
Note may be requested orally or in writing by Borrower or by an authorized
person. Noteholder may, but need not, require that all oral requests be
confirmed in writing. The date and amount of each Advance shall be evidenced by
endorsements by Noteholder on Schedule A attached to this Note; provided that
----------
the failure of the Noteholder to make any such endorsement shall not limit or
otherwise affect the obligations of Borrower hereunder.
-1-
<PAGE>
Borrower waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Noteholder in exercising any right hereunder shall operate as a
waiver of such right under this Note.
If the indebtedness represented by this Note or any part thereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Borrower agrees to pay, in addition to the principal and interest
payable hereon, reasonable attorneys' fees and costs incurred by Noteholder.
Borrower and Noteholder intend to comply at all times with applicable usury
laws. If at any time such laws would render usurious any amounts due under this
Note under applicable law, then it is Borrower's and Noteholder's express
intention that Borrower not be required to pay interest on this Note at a rate
in excess of the maximum lawful rate, that the provisions of this paragraph
shall control over all other provisions of this Note which may be in apparent
conflict hereunder, that such excess amount shall be immediately credited to the
principal balance of this Note (or, if this Note has been fully paid, refunded
by Noteholder to Borrower), and the provisions hereof shall immediately reformed
and the amounts thereafter decreased, so as to comply with the then applicable
usury law, but so as to permit the recovery of the fullest amount otherwise due
under this Note. Any such crediting or refund shall not cure or waive any
default by Borrower under this Note. The term "applicable law" as used in this
paragraph shall mean the laws of the State of California or the laws of the
United States, whichever laws allow the greater rate of interest, as such laws
now exist or may be changed or amended or come into effect in the future.
This Note shall be construed and enforced in accordance with, and governed
by, the internal laws of the State of California, excluding that body of law
applicable to conflicts of law.
THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed
in its name this day of October, 1997.
---
Borrower: TOWING AMERICA, INC.
By: /s/ E. T. Sheehan
---------------------------------------
Name: E. T. Sheehan
Title: CEO
-3-
<PAGE>
SCHEDULE A
----------
AMOUNT AND DATE OF ADVANCES
Amout of Advance Date of Advance
- ---------------- ---------------
1,080 July 98
995 Aug. 98
4,517 Sept. 98
9,145 Oct. 98
8,364 Nov. 98
2,083 Dec. 97
-4-
<PAGE>
EXHIBIT 10.12
TOWING AMERICA INC.
------------------
PROMISSORY NOTE
---------------
$1,000,000.00 October , 1997
---
FOR VALUE RECEIVED, the undersigned, Towing America, Inc., a Delaware
corporation ("Borrower"), promises to pay to the order of Ross Berner
("Noteholder") in lawful money of the United States of America and in
immediately available funds, the principal amount of ONE MILLION AND 00/100
DOLLARS ($1,000,000.00), or such lesser amount as shall equal the aggregate
unpaid principal amount of the advances (the "Advances') made by the Noteholder
to the Borrower under this Note, together with interest on the unpaid principal
amount of each such Advance. Interest shall be caculated from the date of each
such Advance until paid at the rate of eight and one-half percent (8.5%) per
annum.
Each Advance hereunder shall be at the sole discretion of the Noteholder.
Borrower will repay this loan in one payment of all outstanding principal plus
all accrued unpaid interest on the earlier of (a) demand or (b) upon the
consummation of the Company's first firm commitment underwritten offering of
its securities pursuant to a registration statement under the Securities Act of
1933, as amended.
This Note may be prepaid, in its entirety (including the principal sum and
interest accrued to the date of payment) without the prior written consent of
Noteholder.
Payments by Borrower shall be applied first to any and all accrued interest
through the payment date and second to the principal remaining due hereunder
or upon conversion hereof.
This Note evidences a straight line of credit. Once the $1,000,000.00 has
been advanced, Borrower is not entitled to further Advances. Advances under this
Note may be requested orally or in writing by Borrower or by an authorized
person. Noteholder may, but need not, require that all oral requests be
confirmed in writing. The date and amount of each Advance shall be evidenced by
endorsements by Noteholder on Schedule A attached to this Note; provided that
----------
the failure of the Noteholder to make any such endorsement shall not limit or
otherwise affect the obligations of Borrower hereunder.
-1-
<PAGE>
Borrower waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Noteholder in exercising any right hereunder shall operate as a
waiver of such right under this Note.
If the indebtedness represented by this Note or any part thereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Borrower agrees to pay, in addition to the principal and interest
payable hereon, reasonable attorneys' fees and costs incurred by Noteholder.
Borrower and Noteholder intend to comply at all times with applicable usury
laws. If at any time such laws would render usurious any amounts due under this
Note under applicable law, then it is Borrower's and Noteholder's express
intention that Borrower not be required to pay interest on this Note at a rate
in excess of the maximum lawful rate, that the provisions of this paragraph
shall control over all other provisions of this Note which may be in apparent
conflict hereunder, that such excess amount shall be immediately credited to the
principal balance of this Note (or, if this Note has been fully paid, refunded
by Noteholder to Borrower), and the provisions hereof shall immediately reformed
and the amounts thereafter decreased, so as to comply with the then applicable
usury law, but so as to permit the recovery of the fullest amount otherwise due
under this Note. Any such crediting or refund shall not cure or waive any
default by Borrower under this Note. The term "applicable law" as used in this
paragraph shall mean the laws of the State of California or the laws of the
United States, whichever laws allow the greater rate of interest, as such laws
now exist or may be changed or amended or come into effect in the future.
This Note shall be construed and enforced in accordance with, and governed
by, the internal laws of the State of California, excluding that body of law
applicable to conflicts of law.
THIS NOTE REPRESENTS THE FINAL AGREENENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed
in its name this day of October, 1997.
------------
Borrower: TOWING AMERICA, DJC.
By: /s/ E. T. Sheehan
------------------------------
Name: E. T. Sheehan
Title: CEO
-3-
<PAGE>
SCHEDULE A
----------
AMOUNT AND DATE OF ADVANCES
Amount of Advance Date of Advance
- ----------------- ---------------
$50,000 12/16/97
838 Aug. 97
554 Sept. 97
9,848 Oct. 97
3,042 Nov. 97
1,942 Dec. 97
-4-
<PAGE>
EXHIBIT 24.2
The Stockholders and Board of Directors
United Road Services, Inc.:
We consent to the use of our reports on United Road Services, Inc., Northland
Auto Transporters, Inc. and Northland Fleet Leasing, Inc., Falcon Towing and
Auto Delivery, Inc., Smith-Christensen Enterprises, Inc. and subsidiary, Caron
Auto Works, Inc. and Caron Auto Brokers, Inc., Absolute Towing and Transporting,
Inc., Keystone Towing, Inc., and ASC Transportation Services and subsidiary
included herein and to the reference to our firm under the heading "Experts" in
the prospectus.
/s/ KPMG Peat Marwick LLP
Albany, New York
February 24, 1998
<PAGE>
EXHIBIT 99.1
CONSENT
The undersigned hereby consents to being named in the Registration
Statement on Form S-1 of United Road Services, Inc. ("URS") as a director to be
appointed after consummation of the initial public offering of URS.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective
as of the 17th day of February, 1998.
/s/ Grace M. Hawkins
-------------------------
Grace M. Hawkins
<PAGE>
EXHIBIT 99.2
CONSENT
The undersigned hereby consents to being named in the Registration
Statement on Form S-1 of United Road Services, Inc. ("URS") as a director to be
appointed after consummation of the initial public offering of URS.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective
as of the 18th day of February, 1998.
/s/ Mark Henninger
-------------------------
Mark Henninger
<PAGE>
EXHIBIT 99.3
CONSENT
The undersigned hereby consents to being named in the Registration
Statement on Form S-1 of United Road Services, Inc. ("URS") as a director to be
appointed after consummation of the initial public offering of URS.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective
as of the 17th day of February, 1998.
/s/ Donald F. Moorehead, Jr.
----------------------------
Donald F. Moorehead, Jr.
<PAGE>
EXHIBIT 99.4
CONSENT
The undersigned hereby consents to being named in the Registration
Statement on Form S-1 of United Road Services, Inc. ("URS") as a director to be
appointed after consummation of the initial public offering of URS.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective
as of the 23rd day of February, 1998.
/s/ Edward Morawski
-------------------------
Edward Morawski
<PAGE>
EXHIBIT 99.5
CONSENT
The undersigned hereby consents to being named in the Registration
Statement on Form S-1 of United Road Services, Inc. ("URS") as a director to be
appointed after consummation of the initial public offering of URS.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective
as of the 23rd day of February, 1998.
/s/ Todd Q. Smart
-------------------------
Todd Q. Smart
<PAGE>
EXHIBIT 99.6
CONSENT
The undersigned hereby consents to being named in the Registration
Statement on Form S-1 of United Road Services, Inc. ("URS") as a director to be
appointed after consummation of the initial public offering of URS.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective
as of the 23rd day of February, 1998.
/s/ Edward Smith
-------------------------
Edward Smith
