UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(MARK)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
PERIOD ENDED JUNE 30, 1998.
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 000-24019
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United Road Services, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 94-3278455
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 Automation Lane
Albany, New York 12205
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 446-0140
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X NO
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As of August 10, 1998, the registrant had 14,251,515 shares of
common stock issued and outstanding.
<PAGE>
UNITED ROAD SERVICES, INC.
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Form 10-Q For The Quarterly Period Ended June 30, 1998
Index Page
Part I. - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations
For the Three Months and Six Months Ended
June 30, 1998 4
Condensed Consolidated Statement of Cash Flows for
the Six Months Ended June 30, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. - Other Information
Item 2 Changes in Securities and Use of Proceeds 14
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June 30, December 31,
1998 1997
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ASSETS (Unaudited)
- ------
Current assets:
Cash and cash equivalents $40,931 $50
Trade receivables, net 4,871 -
Other receivables 1,267 -
Prepaid expenses and deposits 1,454 -
--------- ----
Total current assets 48,523 50
Property and equipment, net 18,648 -
Goodwill, net 65,650 -
Deferred financing costs, net 871 -
Other non-current assets 44 -
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Total assets $133,736 $50
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt and
capitalized leases $1,247 $ -
Notes payable 922 -
Accounts payable 4,582 62
Accrued income taxes 292 -
Other accrued liabilities 2,045 -
Due to related parties 798 92
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Total current liabilities 9,886 154
Long-term debt and capitalized lease obligations
less current portion 1,156 -
Deferred income taxes 811 -
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Total liabilities 11,853 154
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Stockholders' equity (deficit):
Preferred stock; 5,000,000 shares authorized;
no shares issued or outstanding - -
Common stock, $.001 par value; 35,000,000
shares authorized; Issued and outstanding
13,152,381 and 2,604,000 shares at
June 30, 1998 and December 31, 1997,
respectively 13 3
Additional paid-in capital 121,819 67
Retained earnings (deficit) 51 (174)
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Total stockholders' equity (deficit) 121,883 (104)
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Total liabilities and stockholders'equity $133,736 $50
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months and Three Months Ended June 30, 1998
(Unaudited)
(In thousands, except per share amounts)
Three Months Six Months
------------ ----------
Revenue $8,468 $8,468
Cost of revenue 5,458 5,458
Amortization of goodwill 189 189
Depreciation 337 339
Selling, general and administrative expenses 1,940 2,328
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Income from operations 544 154
Other income (expense):
Interest income 472 477
Interest expense (114) (114)
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Income before income taxes 902 517
Income tax expense 445 292
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Net income $457 $225
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Per share amounts:
Basic earnings $.05 $.04
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Diluted earnings $.05 $.04
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30, 1998
(Unaudited)
(In thousands)
Cash flows from operating activities:
Net income $225
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 339
Amortization of goodwill 189
Amortization of deferred loan costs 12
Changes in operating assets and liabilities:
Increase in trade receivables (70)
Increase in other receivables (629)
Increase in prepaid expenses and deposits (231)
Increase in other non-current assets (44)
Increase in accounts and notes payable 2,299
Increase in accrued income taxes 292
Increase in other accrued liabilities 752
Increase in amounts payable to related parties 706
Net cash provided by operating activities 3,840
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Cash flows from investing activities:
Acquisition of companies, net of cash acquired (42,510)
Purchase of property and equipment (2,378)
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Net cash used in investing activities 44,888
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Cash flows from financing activities:
Proceeds from issuance of stock, net 90,982
Increase in deferred financing costs (883)
Payments on long-term debt and capital leases (8,170)
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Net cash provided by financing activities 81,929
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Net increase in cash and cash equivalents 40,881
Cash and cash equivalents at beginning of period 50
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Cash and cash equivalents at end of period $40,931
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Supplemental disclosure of cash flows information:
Cash paid during the period for interest $61
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Warrant issued to lender as partial loan fee $471
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements
June 30, 1998
(1)DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) INTERIMFINANCIALSTATEMENTS
The interim financial information included in these consolidated
financial statements is unaudited but reflects all adjustments
(consisting of only normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the
results for the interim periods presented. Results of operations
for the three and six months ended June 30, 1998 are not necessarily
indicative of results to be expected for the year ending December
31, 1998.
(b) DescriptionofBusiness
United Road Services, Inc. (formerly Towing America, Inc.), a
Delaware corporation, was formed in July 1997 to become a leading
national provider of motor vehicle and equipment towing and
transport services. United Road Services, Inc. acquired twelve
businesses (the "Acquisitions") through June 30, 1998, seven of
which closed simultaneously with the consummation of an initial
public offering (the "Offering") of its common stock (the "Common
Stock") on May 6, 1998. United Road Services, Inc. intends to
continue to acquire similar businesses to expand its national
operations.
Most of United Road Services, Inc.'s activities to date have related
to the Offering and the Acquisitions. United Road Services, Inc.
has a limited 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, the availability
of acquisition financing, the ability to manage growth and attract
and retain quality management.
(c) IncomeTaxes
From July 25, 1997 (inception) to December 31, 1997, United Road
Services, Inc. elected to file federal and State income tax returns
under S-corporation provisions. As such, earnings or losses flowed
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.
Effective January 1, 1998, United Road Services, Inc. elected to
file federal and State income tax returns under C-corporation
provisions. As a result of United Road Services, Inc. profit for
the six month period ended June 30, 1998, a tax expense has been
recorded at June 30, 1998 at the effective tax rate expected by
United Road Services, Inc. for the year ending December 31, 1998.
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements, Continued
(1) - CONTINUED
(d) UseofEstimates
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 unaudited interim consolidated financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(e) PerShareAmounts
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that shared in the
earnings of the entity (such as stock options and warrants).
The following table provides calculations of both basic and diluted
earnings per share:
Three months ended June 30, 1998
Weighted Per
Net average share
Income shares amounts
------ -------- -------
Basic $ 457,000 9,372,725 $ .05
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Diluted $ 457,000 9,524,590 $ .05
========== ========= ======
Six months ended June 30, 1998
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Weighted Per
Net average share
Income shares amounts
------ -------- -------
Basic $ 225,000 6,115,824 $ .04
========== ========= ======
Diluted $ 225,000 6,230,733 $ .04
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(f) ImpactofRecentlyIssuedAccountingStandards
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income". SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
SFAS No. 130 requires all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed in equal
prominence with the other financial statements. United Road
Services, Inc. adopted SFAS No. 130 during the period ended March
31, 1998, however the adoption of SFAS No. 130 did not have any
effect on the reporting and display of the financial position,
results of operations or cash flows of United Road Services, Inc.
There is no difference in the three months and six months ended June
30, 1998 between net income and comprehensive income.
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements, Continued
(1) - CONTINUED
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131
established standards for the way public companies are to report
information about operating segments in annual financial statements
and requires those enterprises to report selected information about
operating segments in interim financial reports issued to
shareholders. SFAS No. 131 focuses on a "management approach"
concept as the basis for identifying reportable segments. The
management approach is based on the way that management organizes
the segments within the enterprise for making operating decisions
and assessing performance. United Road Services, Inc. continues to
evaluate the provisions of SFAS No. 131.
In March 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." SOP 98-1 requires that certain costs related to
the development or purchase of internal-use software be capitalized
and amortized over the estimated useful life of the software. SOP
98-1 also requires that costs related to the preliminary project
stage and post-implementation/operations stage of an internal-use
computer software development project be expensed as incurred.
United Road Services, Inc. adopted SOP 98-1 as of January 1, 1998.
However due to the initial stages of United Road Services, Inc.'s
operations, there was no significant effect on its financial
position or results of operations during the six months ended June
30, 1998.
In March 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires the expensing of certain
costs such as pre-operating expenses and organizational costs
associated with the company's start-up activities. The effect of
adoption is required to be accounted for as a cumulative change in
accounting principle. United Road Services, Inc. adopted SOP 98-5
as of January 1, 1998. However, due to the initial stages of United
Road Services, Inc.'s operations, all start-up costs have been
expensed.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective
for all fiscal quarters of fiscal years beginning after June 15,
1999. Management is currently evaluating the impact of SFAS No. 133
on the United Road Services, Inc. consolidated financial statements.
(2)STOCKHOLDERS' EQUITY
United Road Services, Inc. effected a 100-for-one stock split on
December 18, 1997. In addition United Road Services, Inc. increased its
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. Common Stock has been retroactively reflected in the
consolidated balance sheets.
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements, Continued
(2) - 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 of Common Stock. These shares were issued and fully paid on
January 1, 1998 for $3.36 per share.
In January 1998, United Road Services, Inc. issued 29,760 shares of
Common Stock to a member of the board of directors for a purchase price
of $3.36 per share. In addition, options to purchase 550,000 shares of
Common Stock were granted as of June 30, 1998 to several employees of
United Road Services, Inc. and outside consultants. Such stock options
were issued at an average exercise price of $12.47 per share and vest
over a three-year period.
On May 6, 1998, United Road Services, Inc. completed its initial public
offering of 6,600,000 shares of Common Stock. On May 6, 1998, the
Underwriters also exercised their overallotment option to purchase an
additional 990,000 shares of Common Stock. The net proceeds to the
Company were $91,800,000.
On May 6, 1998, United Road Services, Inc. issued 2,375,741 shares of
Common Stock in conjunction with the acquisition of the Founding
Companies.
During the period June 12, 1998 through June 30, 1998 the Company
acquired five additional companies using a combination of Common Stock
and cash. The total number of shares issued was 363,904 with a
recorded fair value of $6,071,853.
(3) DUE TO RELATED PARTIES
At December 31, 1997 United Road Services, Inc. was indebted to two of
its primary stockholders under unsecured notes, bearing interest at 8.5%
per annum. The notes and unpaid interest were repaid subsequent to
the Offering. At June 30, 1998 the balance represents amounts owed
to former owners of companies acquired being held to offset potential
contingencies related to the purchases.
<PAGE>
UNITED ROAD SERVICES, INC.
Notes to Unaudited Financial Statements, Continued
(4) SUBSEQUENT EVENTS
(a) Since June 30, 1998, United Road Services, Inc. has acquired 17
motor vehicle and equipment towing and transport services
businesses, including Keystone Towing, Inc., for $25.1 million in
cash and 1,099,134 shares of Common Stock, and signed definitive
agreements to acquire three additional businesses for total
consideration of $5.8 million.
(b) In connection with its acquisition program, United Road Services,
Inc. may enter into agreements with the stockholders of acquired
companies to lease buildings in United Road Services, Inc.'s
operations for negotiated amounts and terms.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the unaudited
financial statements and notes thereto included in Item 1 of this Quarterly
Report.
Cautionary Statements
- ---------------------
From time to time, in written reports and oral statements, management may
discuss their expectations regarding United Road Services, Inc.'s future
performance. These "forward-looking statements" are based on currently
available competitive, financial and economic data and management's
operating plans and involve risks and uncertainties that could render actual
results materially different from management's expectations. Such risks and
uncertainties include, without limitation, general economic conditions,
changes in applicable regulations, including but not limited to, various
federal, state and local laws and regulations regarding equipment, driver
certification, training and recordkeeping and workplace safety, the loss of
significant customers and contracts, risks related to the Company's
acquisition strategy and its ability to integrate acquired companies,
changes in the level of demand for towing and transport services, price
changes in response to competitive factors, seasonal variations and the
timing of expenditures for new equipment and the disposition of used
equipment. Investors must recognize that events could turn out to be
significantly different from what management expects.
Overview
- --------
United Road Services, Inc. ("United Road" or the "Company") was formed in
July 1997 to become a leading national provider of motor vehicle and
equipment towing and transport services. Simultaneously with its initial
public offering of Common Stock (the "Offering") in May 1998, United Road
acquired (the "Founding Company Acquisitions") seven motor vehicle and
equipment towing and transport services businesses (the "Founding
Companies") and is now one of the largest providers of these services
in the United States. The Founding Companies have been in business for
periods ranging from ten to 48 years and operate an aggregate of 15
facilities located in six states. In June 1998, United Road acquired five
additional motor vehicle and equipment towing and transport services
businesses (the "June Acquisitions"). Since June 30, 1998, United Road has
acquired 17 motor vehicle and equipment towing and transport services
businesses, including Keystone Towing, Inc., and entered into definitive
agreements to acquire three additional businesses (the "Subsequent
Acquisitions" and together with the Founding Company Acquisitions and the
June Acquisitions, the "Acquisitions").
United Road 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 and
heavy construction equipment. United Road derives revenue from towing and
transport services based on distance, time or fixed charges and from related
impounding and storage fees. In the event that impounded vehicles are not
la ted impounding and storage fees. In the event that impounded vehicles
are not claimed by their owners within prescribed time periods, United Road
is paid from the proceeds of lien sales or auctions. United Road'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.
Results of Operations - Three Months Ended June 30, 1998
- --------------------------------------------------------
Revenue was $8.5 million for the three months ended June 30, 1998. Cost of
revenue was $6.0 million, or 70.7% of revenue, for the three months ended
June 30, 1998, consisting primarily of $3.6 million in labor and
subcontractor costs, resulting in a gross profit of $2.5 million or 29.3% of
revenue.
<PAGE>
Selling, general and administrative expenses were $1.9 million or 22.9% of
revenue for the three months ended June 30, 1998 consisting primarily of
$1.0 million in salary and wages, resulting in income from operations of
$544,000 or 6.4% of revenue. Other income (expense) was $358,000 or 4.3% of
revenue for the three months ended June 30, 1998 consisting primarily of
$472,000 of interest income.
Results of Operations - Six Months Ended June 30, 1998
- ------------------------------------------------------
Revenue was $8.5 million for the six months ended June 30, 1998. Cost of
revenue was $6.0 million or 70.7% of revenue for the six months ended June
30, 1998, consisting primarily of $3.6 million in labor and subcontractor
costs, resulting in a gross profit of $2.5 million or 29.3% of revenue.
Selling, general and administrative expenses was $2.3 million or 27.5% of
revenue for the six months ended June 30, 1998, consisting primarily of $1.0
million in salary and wages, resulting in income from operations of
$154,000 or 1.8% of revenue. Other income (expense) was $363,000 or 4.3% of
revenue for the six months ended June 30, 1998, consisting primarily of
$477,000 of interest income.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1998, working capital was $38.6 million. Through June 30, 1998,
United Road incurred certain costs associated with the Offering,
the Acquisitions and costs related to obtaining a commitment for a
revolving Credit Facility of $50 million. United Road met its cash needs
during the second quarter of 1998 primarily through capital provided by the
Offering.
United Road completed the Offering of 6,600,000 shares of Common Stock
(7,590,000 shares upon exercise of the underwriters' over-allotment option)
in May 1998. A portion of the net proceeds available to United Road from
the Offering (which proceeds equalled $78.3 million or $91.8 million upon
exercise of the underwriters' over-allotment option) were used to pay the
cash portion of the purchase price of the Founding Company Acquisitions
and the June Acquisitions, as described in notes 1(b) and 4 of the
quarterly financial information included herein, expenses incurred in
connection with the Acquisitions, and repayment of certain indebtedness
assumed as part of the Acquisitions.
United Road has a $50 million revolving credit facility with a group of
financial institutions, for which Bank of America is acting as agent (the
"Credit Facility"). The Credit Facility terminates in June 2001, at which
time all outstanding indebtedness will be due. Borrowings under the Credit
Facility accrue interest, at United Road's option, at either (a) the Base
Rate (which is equal to the greater of (i) the Federal Funds Rate plus
0.5% and (ii) Bank of America's reference rate), or (b) the Eurodollar Rate
(which is equal to Bank of America's reserve adjusted eurodollar rate plus
a margin ranging from 1.5% to 2.5% per annum). The obligations of United
Road under the Credit Facility are guaranteed by each of its subsidiaries.
The obligations of United Road and its subsidiaries under the Credit
Facility and related guarantees are secured by substantially all of the
assets of United Road, the assets of the subsidiaries and the stock of the
subsidiaries. The Credit Facility requires United Road to comply with
various loan covenants including (i) maintenance of certain financial ratio
nal indebtedness, and (iii) restrictions on liens, guarantees, advances
and dividends. The Credit Facility is subject to customary drawing
conditions. United Road has not yet borrowed any amounts under the Credit
Facility. To the extent United Road draws down the Credit Facility to
finance capital expenditures, the Company's interest expense for future
periods will increase. In connection with the Credit Facility, the
Company issued to Bank of America National Trust and Savings Association
a warrant to purchase 117,789 shares of Common Stock at an exercise
price of $13.00 per share. The warrant expires on June 16, 2003.
United Road's near-term principal sources of cash are (i) net proceeds from
the Offering, (ii) borrowings under the Credit Facility and (iii) results
from operations. These sources of cash will be used for future
acquisitions, capital expenditures, refinancing of outstanding debt and for
general corporate purposes, and should enable United Road to fund its day-
to-day working capital requirements in the near term.
United Road is in the process of implementing systems that will enable it to
centralize its accounting and financial reporting activities at its
headquarters in Albany, New York. In addition, management intends to
develop a national dispatch system for its transport operations.
Management estimates that it will make expenditures of approximately $3.2
million in 1998 in order to install an integrated information system. The
vendors of the information software have informed management that the system
will be year 2000 compliant. Although United Road expects that it will be
required to upgrade and expand this system in the future, management cannot
quantify such expenditures at this time.
The Founding Companies spent an aggregate of $2.4 million on purchases of
property and equipment, which includes towing and transport vehicles, during
the three months ended March 31, 1998. United Road spent $2.4 million on
purchases of property and equipment (including amounts spent in connection
with installation of the integrated information system) for the six months
ended June 30, 1998. United Road expects to make capital expenditures of an
additional $3.0 million during the remainder of 1998. Sources of liquidity
to meet these demands are expected to be generated from earnings and related
cash flow.
United Road intends to pursue additional acquisition opportunities and
expects to fund future acquisitions through the issuance of additional
Common Stock, borrowings under the Credit Facility, and cash flow from
operations. There can be no assurance that any such financing will be
available on terms satisfactory to United Road or at all.
General Economic Conditions and Inflation
- -----------------------------------------
United Road's future operating results may be adversely affected by (i)
changes in general economic conditions, including various federal, state and
local laws and regulations regarding equipment, driver certification,
training and recordkeeping and workplace safety, (ii) the loss of
significant customers or contracts, (iii) success in integrating acquired
companies and future acquisitions, (iv) price changes in response to
competitive factors, (v) seasonal variations, and (vi) the timing of
expenditures for new equipment and the disposition of used equipment.
Although United Road cannot accurately anticipate the effect of inflation on
its operations, management believes that inflation has not had, and is not
likely in the foreseeable future to have, a material impact on its results
of operations.
<PAGE>
Part II. OTHER INFORMATION
-----------------
Item 2 Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
---------------------------------------
On May 6, 1998, the Company issued an aggregate of 2,375,741 shares of
Common Stock to private investors, all of whom were accredited investors, in
connection with the Company's acquisitions of Northland Auto Transporters,
Inc., Northland Fleet Leasing, Inc., Falcon Towing and Auto Delivery, Inc.,
Smith Christensen Enterprises, Inc., Caron Auto Works, Inc., Caron Auto
Brokers, Inc., Absolute Towing and Transporting, Inc., ASC Transportation
Services, and Silver State Tow & Recovery, Inc.
On June 12, 1998, the Company issued an aggregate of 212,023 shares of
Common Stock to private investors, all of whom were accredited investors, in
connection with the Company's acquisition of 5L Corporation and ADP
Transport, Inc.
On June 22, 1998, the Company issued an aggregate of 93,902 shares of
Common Stock to private investors, all of whom were accredited, in
connection with the Company's acquisition of D&M Auto Towing, Inc.
On June 29, 1998, the Company issued an aggregate of 35,956 shares of
Common Stock to private investors, all of whom were accredited, in
connection with the Company's acquisition of Rouse's Body Shop, Inc.
On June 30, 1998, the Company issued an aggregate of 22,023 shares of
Common Stock to private investors, all of whom were accredited, in
connection with the Company's acquisition of Northshore Towing, Inc.,
Northshore Recycling Inc. and Evanston Reliable Maintenance, Inc.
On June 16, 1998, the Company issued a warrant to purchase 117,789
shares of Common Stock at $13.00 per share to Bank of America National Trust
and Savings Association, an accredited investor, in connection with the
Credit Facility. The warrant expires on June 16, 2003.
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.
Certain Information Concerning the Company's Initial Public Offering
- --------------------------------------------------------------------
Set forth below is certain information concerning the Company's initial
public offering ("the "Offering").
1. During the period from April 30, 1998 (the effective date of the
Registration Statement) through June 30, 1998, the total expenses paid by
the Company related to the Offering (determined on a cash basis) were $8.0
million. Such expenses consisted of the following:
a. $6.9 million paid to the underwriters in respect of the
underwriting discount and commission; and
<PAGE>
b. $1.1 million of other expenses.
2. None of the payments described in paragraph 1 above represented a
direct or indirect payment to (i) directors, officers or general partners of
the Company or to their associates, (ii) persons owning 10% or more of any
class of equity securities of the Company or (iii) affiliates of the
Company.
3. After deducting the payments described in paragraph 1 above, the
amount of Offering proceeds that remained was $90.7 million. The Company
used $48.7 million of such proceeds as follows:
a. $27.8 million to pay the cash portion of the purchase price
of the seven acquisitions consummated simultaneously with the
Offering (the "Founding Company Acquisitions"), $12.3 million
of which was paid directly or indirectly to persons who are
now directors or officers of the Company;
b. $7.2 million to repay certain indebtedness assumed as part of
the Founding Company Acquisitions.
c. $12.1 million to pay the cash portion of the purchase price
of five acquisitions consummated in June 1998 (the "June
Acquisitions") none of which was paid directly or indirectly
to persons who are now directors or officers of the Company;
d. $1.0 million to repay certain indebtedness assumed as part of
the June Acquisitions; and
e. $612,000 to pay expenses related to the Founding Company
Acquisitions and the June Acquisitions.
As of June 30, 1998, the balance of such proceeds was invested in temporary
investments consisting of short-term securities.
Item 5. Other Information
Effective June 3, 1998, Ross Berner and Mark McKinney resigned as
directors and officers of the Company. Effective June 16, 1998, Richard A.
Molyneux was appointed to the Board of Directors to fill one of the
vacancies caused by such resignations and Robert Joseph Adams, Jr. was
appointed Chief Acquisition Officer of the Company.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description of Documents
- ------- ------------------------
10.1 Credit Agreement dated as of May 8, 1998 among the Company,
various financial institutions and Bank of America National Trust
and Savings Association, as Agent (incorporated by reference to
Exhibit 10.10 to the Company's Registration Statement on Form S-1
(Reg. No. 333-56603)).
10.2 First Amendment to Credit Agreement dated June 26, 1998 among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, as Agent.
10.3 Second Amendment to Credit Agreement dated July 15, 1998 among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, as Agent.
10.4 Amended and Restated Employment Agreement dated as of May 1, 1998
between the Company and Donald J. Marr (incorporated by reference
to Exhibit 10.11 to the Company's Registration Statement on Form
S-1 (Reg. No. 333-56603)).
10.5 Resignation letter from Mark McKinney in favor of the Company
(incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-1 (Reg. No. 333-56603)).
10.6 Resignation letter from Ross Berner in favor of the Company
(incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1 (Reg. No. 333-56603)).
10.7 Employment Agreement dated as of June 1, 1998 between the Company
and Robert Joseph Adams, Jr.
11.1 Statement re computation of per share earnings
27.1 Financial data schedule
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED ROAD SERVICES, INC.
Registrant
Date August 10, 1998 /s/ Edward T. Sheehan
--------------------- ---------------------------
Edward T. Sheehan
Chairman and Chief Executive
Officer
Date August 10, 1998 /s/ Donald J. Marr
--------------------- ---------------------------
Donald J. Marr
Chief Financial Officer
June 26, 1998
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attention: Ed Sheehan
Re: First Amendment to Credit Agreement
---------------------------------------------
Ladies/Gentlemen:
Please refer to the Credit Agreement dated as of May 8, 1998 (the
"Credit Agreement") among United Road Services, Inc., various financial
institutions and Bank of America National Trust and Savings Association, as
Agent. All terms used but not defined herein shall have the meanings
ascribed to such terms in the Credit Agreement.
The Company, the Agent and the Required Banks agree that the Credit
Agreement shall be amended as follows:
(i) Section 2.1.2 shall be amended by deleting the amount "$1,000,000"
appearing in the fourth to last line thereof and substituting the amount
"$5,000,000" therefor;
(ii) Subsection 10.7(b) shall be amended by inserting the phrase "or
any Subsidiary" immediately after the word "Company" appearing in the first
line thereof;
(iii) Subsection 10.7(c) shall be amended in its entirety to read as set
forth below:
"(c) Debt secured by Liens permitted by subsection 10.8(c) or (d),
------------------ ---
and refinancings of any such Debt so long as the terms applicable
to such refinanced Debt are no less favorable to the Company or
the applicable Subsidiary than the terms in effect immediately
prior to such refinancing, provided that the aggregate amount of
--------
all such Debt at any time outstanding shall not exceed (i)$4,500,000
in the case of all Debt described in subsections 10.8(c) and clauses
------------------- ------
(i), (ii) and (iii) of subsection 10.8(d) and (ii) $10,000,000 in
--------- --- ------------------
the case of all Debt described in clause (iv) of subsection
---------- ----------
10.8(d);" and
-------
<PAGE>
(iv) Subsection 10.8(d) shall be amended in its entirety to read as set
forth below:
"(d) subject to the limitations set forth in subsection 10.7(c),
(i)
------------------
Liens arising in connection with Capital Leases (and attaching
only to the property being leased), (ii) Liens existing on
property at the time of the acquisition thereof (or the
acquisition of the owner of such property) by the Company or any
Subsidiary (and not created in contemplation of such acquisition),
(iii) Liens that constitute purchase money security interests on
any tangible property securing Debt incurred for the purpose of
financing all or any part of the cost of acquiring such property,
provided that any such Lien attaches to
--------
such property within 60 days of the acquisition thereof and such
Lien attaches solely to the property so acquired, and (iv) Liens
on vehicles existing at the time the Company or a Subsidiary
acquires such vehicles, or acquires the owner of such vehicles,
pursuant to an acquisition described in clause (c) of Section
10.10, provided that,
---------- -------------
except to the extent such Liens are permitted by clause (i), (ii)
or
----------------
(iii) of this subsection (d), each such Lien shall be released not
----- --------------
later than 90 days after such acquisition;".
This letter is limited to the matters specifically set forth herein and
shall not be deemed to constitute an amendment, waiver or consent with
respect to any other matter whatsoever. Except as specifically set forth
herein, the Credit Agreement shall remain in full force and effect and is
hereby ratified in all respects.
<PAGE>
This letter may be executed in counterparts and by the parties hereto
on separate counterparts. This letter shall become effective upon receipt
by the Agent of counterparts hereof (or facsimiles thereof) executed by the
Company and the Required Banks.
This waiver letter shall be governed by the laws of the State of
Illinois applicable to contracts made and to be performed entirely within
such State.
<PAGE>
Please acknowledge your agreement to the foregoing by signing and
returning a counterpart hereof to the Agent.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
--------------------------------------
Title:
-----------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVING
ASSOCIATION, as Issuing Bank and as a
Bank
By:
--------------------------------------
Title:
-----------------------------------
BANKBOSTON, N.A., as a Bank
By:
-------------------------------------
Title:
----------------------------------
COMERICA BANK, as a Bank
By:
-------------------------------------
Title:
----------------------------------
FLEET NATIONAL BANK, as a Bank
By:
-------------------------------------
Title:
----------------------------------
ACCEPTED AND AGREED
as of June __, 1998 UNITED ROAD SERVICES, INC.
By:
-------------------------------------
Title:
---------------------------------
July 15, 1998
United Road Services, Inc.
8 Automation Lane
Albany, New York 12205
Attention: Ed Sheehan
Re: Second Amendment to Credit Agreement
------------------------------------
Ladies/Gentlemen:
Please refer to the Credit Agreement dated as of May 8, 1998 (the
"Credit Agreement") among United Road Services, Inc., various financial
institutions and Bank of America National Trust and Savings Association, as
Agent. All terms used but not defined herein shall have the meanings
ascribed to such terms in the Credit Agreement.
The Company, the Agent and the Required Banks agree that the definition
of "Borrowing Base" in the Credit Agreement shall be amended in its entirety
to read as set forth below:
"Borrowing Base means the sum of (a) 85% of Eligible Receivables;
---------------
plus (b) 60% of Eligible Inventory, provided that the amount
determined
pursuant to this clause (b) shall not exceed $5,000,000; plus (c)
----------
75% of the Equipment Value of all Eligible Equipment; plus (d) the
of (i) the Overadvance Amount or (ii) the sum of clauses
(a), (b) and (c). For purposes of the foregoing, the "Overadvance
Amount" shall be (i) $25,000,000 during the period from the date
hereof to September 30, 1998, (ii) $20,000,000 during the period
from September 30, 1998 to December 31, 1998, (iii) $15,000,000
during the period from December 31, 1998 to March 31, 1999, and (iv)
$10,000,000, from March 31, 1999 and thereafter; provided that as of
the date on which the net proceeds received by the Company after
June 30, 1998 from the issuance of equity equals or exceeds
$100,000,000, the Overadvance Amount shall not decrease according to
the schedule set forth above but shall remain constant at the
Overadvance Amount as of such date."
The Company, the Agent and the Required Banks agree that the Company,
at its option, may deliver a new borrowing base certificate at any time with
respect to Eligible Inventory, the Equipment Value of Eligible Equipment and
Eligible Receivables but only with respect to Eligible Receivables acquired
by the Company or any Subsidiary as a result of an acquisition permitted by
Section 10.10 of the Credit Agreement after a month-end for which a
borrowing base certificate has previously been delivered. The Agent may, in
its discretion, similarly request a new borrowing base certificate at any
time.
The Company agrees to pay to the Agent for the account of the Banks,
pro rata according to their Percentages, an amendment fee of 0.15% of the
Commitment Amount on the effective date of this amendment.
This letter is limited to the matters specifically set forth herein and
shall not be deemed to constitute an amendment, waiver or consent with
respect to any other matter whatsoever. Except as specifically set forth
herein, the Credit Agreement shall remain in full force and effect and is
hereby ratified in all respects.
<PAGE>
This letter may be executed in counterparts and by the parties hereto
on separate counterparts. This letter shall become effective upon receipt
by the Agent of counterparts hereof (or facsimiles thereof) executed by the
Company and the Required Banks.
This letter shall be governed by the laws of the State of Illinois
applicable to contracts made and to be performed entirely within such State.
<PAGE>
Please acknowledge your agreement to the foregoing by signing and
returning a counterpart hereof to the Agent.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
---------------------------
Title:
-----------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVING
ASSOCIATION, as Issuing Bank and as a
Bank
By:
---------------------------
Title:
-----------------------------------
BANKBOSTON, N.A., as a Bank
By:
---------------------------
Title:
-----------------------------------
COMERICA BANK, as a Bank
By:
---------------------------
Title:
-----------------------------------
FLEET NATIONAL BANK, as a Bank
By:
---------------------------
Title:
-----------------------------------
ACCEPTED AND AGREED
as of July 15, 1998 UNITED ROAD SERVICES, INC.
By:
---------------------------
Title:
-----------------------------------
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") by and between United Road
Services, Inc., a Delaware corporation (the "Company"), and Robert Joseph
Adams, Jr. ("Employee") is hereby entered into and effective this 1st day of
June, 1998. This Agreement hereby supersedes any other employment agreements
or understandings, written or oral, between the Company and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in
the business of providing towing and transport services.
Employee is employed hereunder by the Company in a confidential
relationship wherein Employee, in the course of his or her employment with
the Company, has and will continue to become familiar with and aware of
information as to the Company's customers, specific manner of doing
business, including the processes, techniques and trade secrets utilized by
the Company, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to the Company; this
information is a trade secret and constitutes the valuable goodwill of the
Company.
Therefore, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby
agreed as follows:
A G R E E M E N T S
1. Employment and Duties. The Company hereby employs Employee as
---------------------
Senior Vice President and Chief Acquisition Officer of the Company or such
other position as the Board of Directors shall designate in its sole
discretion. As such, Employee shall have responsibilities, duties and
authority as shall be determined by the Chief Executive Officer of the
Company. Employee hereby accepts this employment upon the terms and
conditions herein contained and agrees to devote his or her working time,
attention and efforts to promote and further the business of the Company.
2. Termination of Consulting Agreement. The Consulting Agreement
-----------------------------------
between Employee and the Company attached hereto as Appendix A (the
"Consulting Agreement") is hereby terminated effective as of June 1, 1998
and such Consulting Agreement shall be of no further force or effect except
that Employee shall be entitled to be paid commissions pursuant to Section
3(d) of the Consulting Agreement with respect to the Company's acquisitions of
Alert Auto Transport, Inc., West Nashville Wrecker Service, Inc. and Kirk's-
Sineath, Inc.
3. Compensation. For all services rendered by Employee, the Company
------------
shall compensate Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be
-----------
$140,000 per year (the "Salary"), payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly.
On at least an annual basis, the Compensation Committee of the Board of
Directors of the Company (the "Board") will review Employee's performance
and may increase such base salary if, in its discretion, any such increase
is warranted. Employee will be eligible for such bonuses, if any, as may be
granted to him from time to time by the Compensation Committee.
(b) Employee Benefits and Other Compensation. Employee will, during
----------------------------------------
the term of this Agreement, have the right to receive such benefits as are
generally made available to full-time officers of the Company, including the
right to participate in any retirement plan or other benefit plans that the
Company may create. In addition, or inclusive of such benefits, the Company
will provide Employee with the following:
<PAGE>
(i) the opportunity to apply for coverage under the Company's
medical, life and disability plans, if any. If Employee is accepted for
coverage under such plans, the Company will provide to Employee and his
or her 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.
(ii) in addition to normal holidays recognized by the Company,
Employee will be entitled to the greater of (a) three (3) weeks paid
vacation annually, or (b) such other amount of paid vacation as may be
afforded officers and key employees of similar position and seniority to
Employee under the Company's policies in effect from time to time (pro
rated for any year in which Employee is employed for less than the full
year).
<PAGE>
4. Term; Termination; Rights on Termination. The term of this
Agreement
----------------------------------------
shall begin on the date hereof and continue for three (3) years (the
"Initial Term"), and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis (the "Renewal Term") on the same
terms and conditions contained herein unless either party gives to the other
party written notice of nonrenewal of the Agreement at least thirty (30)
days prior to the end of the then-current term. This Agreement and
Employee's employment may be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate this
-----
Agreement and, upon such termination, Employee shall be entitled to receive
from the Company one hundred percent (100%) of Employee's base salary at the
rate then in effect for a period of twelve (12) months following the
effective date of termination in periodic payments in accordance with the
payment schedule set forth in Section 3(a) above.
(b) Medically Unable to Perform Job. This Agreement will terminate
-------------------------------
if the Employee, in the good faith determination of the Board, based on sound
medical advice, has become physically or mentally incapable of performing
his duties. In the event this Agreement is terminated as a result of
Employee's inability to perform his duties, Employee shall receive from the
Company, an amount equal to 100% of the Employee's base salary at the rate
then in effect for a period of twelve (12) months following the effective
date of termination in periodic payments in accordance with the payment
schedule set forth in Section 3(a) above, minus all payments in respect of
Employee's salary payable to Employee under the Company's disability
insurance, if any, for the same period.
(c) Good Cause. The Company may terminate this Agreement at any
----------
time for good cause upon written notice to Employee. The phrase "good cause"
shall mean: (i) the commission by Employee of any act detrimental to the
Company, including but not limited to, fraud, embezzlement, theft, bad
faith, negligence, recklessness, dishonesty, insubordination or willful
misconduct; (ii) gross incompetence or repeated failure or refusal to
perform the duties required by this Agreement and as may be assigned to
Employee; (iii) conviction of a crime or any act of moral turpitude; (iv)
any material misrepresentation regarding the operation of the business; or
(v) breach of any material covenant of this Agreement. In the event of a
termination for good cause, as enumerated above, Employee shall have no
right to any severance compensation.
(d) Without Cause. At any time after the commencement of
-------------
employment, the Company may, without cause, terminate this Agreement and
Employee's employment immediately upon written notice to Employee. Should
Employee be terminated by the Company without cause, Employee shall receive
from the Company severance pay equal to one hundred percent (100%) of
Employee's base salary at the rate then in effect for a period of twelve
(12) months following the effective date of Employee's termination, in
periodic payments in accordance with the payment schedule set forth in
Section 3(a) above. Notwithstanding the foregoing, (i) the Company
immediately may cease such periodic payments in the event that, following
termination pursuant to this Section 4(d), Employee makes any disparaging
remarks to any third party regarding the Company and (ii) to the extent that
employee commences employment with any other person, persons, company,
partnership, corporation or business of whatever nature ("Alternate
Employment") during the period in which the Company is required to make
severance payments to Employee hereunder, the Company may subtract from the
amount of such severance payments the amount of any compensation earned by
Employee in the course of such Alternate Employment.
(e) Termination by Employee Without Cause. If Employee resigns or
-------------------------------------
otherwise terminates his or her employment for any reason, except pursuant
to Section 11, Employee shall receive no severance compensation.
<PAGE>
Upon termination of this Agreement for any reason provided in this
Section 4, Employee shall be entitled to receive all compensation earned and
all benefits and reimbursements vested or due through the effective date of
the termination. Upon termination of this Agreement pursuant to Section
4(d) above, the Company will reimburse Employee for the reasonable cost of
medical, dental and disability insurance of the type and amount provided to
Employee under the Company's insurance policies as in effect at the time of
termination for a period of one (1) year from the date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above. All other rights and obligations of the Company and Employee under
this Agreement shall cease as of the effective date of the termination,
except that the Company's obligations under Section 9 herein and Employee's
obligations under Sections 5, 6, 7 and 8 herein shall survive such
termination in accordance with their terms.
5. Return of Company Property. All records, designs, patents,
--------------------------
business plans, financial statements, manuals, memoranda, lists and other
property delivered to or compiled by Employee by or on behalf of the
Company or its representatives, vendors or customers which pertain to the
business of the Company shall be and remain the property of the Company,
and be subject at all times to its discretion and control. Likewise,
all correspondence, reports, records, charts, advertising materials and
other similar data pertaining to the business, activities or future
plans of the Company which is collected by Employee shall be delivered
promptly to the Company without request by it upon termination of
Employee's employment.
6. Noncompetition.
--------------
(a) Prohibited Activities. Employee will not, for a period of one
---------------------
(1) year following Employee's resignation or termination of Employee's
employment with the Company for any reason, directly or indirectly, for
himself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
Right Tab Set created for right-justified (I) paragraph numbering.
(i) engage, as an employee, manager, officer, director,
shareholder, owner, partner, independent contractor, consultant or
advisor or as a sales representative, in any business selling any
products or services in direct competition with the Company or any of
the subsidiaries thereof, within one hundred (100) miles of where the
Company conducts any business at the time of Employee's resignation or
the termination of Employee's employment (the "Territory");
(ii) call upon any person who is, at that time, an employee of
the Company (including the subsidiaries thereof) for the purpose or with
the intent of enticing such employee away from or out of the employ of
the Company (including the subsidiaries thereof); provided that Employee
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
the Company (including the subsidiaries thereof) within the Territory
for the purpose of soliciting or selling products or services in direct
competition with the Company within the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor of the Company,
which candidate was either called upon by the Company (including the
subsidiaries thereof) or for which the Company (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring such
entity; provided that Employee shall not be charged with a violation of
this Section 6(a)(iv) unless and until Employee 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.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than three
percent (3%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter.
(b) Damages Because of the difficulty of measuring economic losses
-------
to the Company as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company
for which it would have no other adequate remedy, Employee agrees that in
addition to all other remedies available at law or in equity the foregoing
covenants may be enforced by the Company, in the event of breach by
Employee, by injunctions and restraining orders.
(c) Reasonable Restraint It is agreed by the parties hereto that
--------------------
the foregoing covenants in this Section 6 impose a reasonable restraint on
Employee in light of the activities and business of the Company (including
the subsidiaries thereof) on the date of the execution of this Agreement and
the current plans of the Company; but it is also the intent of the Company
and Employee that such covenants be construed and enforced in accordance
with the changing activities and business of the Company (including the
subsidiaries thereof) throughout the term of this covenant. Employee agrees
that (i) the covenants contained in this Section 6 are necessary for the
protection of the Company's business goodwill, (ii) a portion of the
compensation paid to Employee under this Agreement is paid in consideration
of the covenants herein contained, the sufficiency of which consideration is
hereby acknowledged, and (iii) if the scope of any restriction contained in
this Section 6 is too broad to permit enforcement of such restriction to its
full extent, then such restriction shall be enforced to the maximum extent
permitted by law, and the parties consent that such scope may be judicially
modified accordingly in any proceeding brought to enforce such restriction.
The existence of any claim or cause of action of Employee against the
Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these covenants.
(d) Independent Covenant. All of the covenants in this Section 6
--------------------
shall be construed as an agreement independent of any other provisions in this
Agreement, and the existence of any claim or cause of action of Employee
against the Company (including the subsidiaries thereof), whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. It is specifically agreed
that the period of one (1) year stated at the beginning of this Section 6,
during which the agreements and covenants of Employee made in this Section 6
shall be effective, shall be computed by excluding from such computation any
time during which Employee is in violation of any provision of this
Sections 6. The covenants contained in this Section 6 shall not be affected
by any breach of any other provision hereof by any party hereto.
7. Inventions. Employee shall disclose promptly to the Company any and
----------
all significant conceptions and ideas for inventions, improvements and
valuable discoveries, whether patentable or not, which are conceived or made
by Employee, solely or jointly with another, during the period of employment
or within one (1) year thereafter, and which are directly related to the
business or activities of the Company and which Employee conceives as a
result of his or her employment by the Company. Employee hereby assigns and
agrees to assign all his or her interests therein to the Company or its
nominee. Whenever requested to do so by the Company, Employee shall execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain Letters Patent of the United
States or any foreign country or to otherwise protect the Company's interest
therein. This prohibition against the assignment of rights to all
inventions in California does not apply to inventions that qualify fully
under the provisions of California Labor Code S2870.
8. Trade Secrets. Employee agrees that he or she will not, during or
-------------
after the term of this Agreement with the Company, disclose the specific
terms of the Company's relationships or agreements with vendors or customers
or any other trade secret of the Company, whether in existence or proposed,
to any person, firm, partnership, corporation or business for any reason or
purpose whatsoever.
9. Indemnification. In the event Employee is made a party to any
---------------
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the
Company against Employee), by reason of the fact that he or she is or was
performing services within the course and scope of his or her employment
<PAGE>
with the Company under this Agreement, then the Company shall protect,
defend, indemnify and hold harmless Employee against all expenses (including
attorneys' fees, costs and expenses), judgments, fines, costs, liabilities,
damages, and amounts paid in settlement, actually and reasonably incurred by
Employee in connection therewith. Without limiting the requirement above
that Employee be performing services within the course and scope of his or
her employment, activities constituting violations of law or Company policy
shall not constitute services within the course and scope of Employee's
employment, and the Company shall not indemnify Employee for any such
activities. Employee agrees to immediately notify the Company of any
threatened, pending or completed matter; provided, however, that Employee's
failure to immediately notify the Company of such matter shall not relieve
the Company of any obligation hereunder, unless, and only to the extent
that, the Company is materially prejudiced by such delay or failure to give
notice. Employee agrees to accept any attorney reasonably assigned by the
Company to defend the Employee; provided that if counsel selected by the
Company shall have a conflict of interest that prevents such counsel from
representing Employee, Employee may engage separate counsel and the Company
shall pay all reasonable attorneys fees of such counsel.
10. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee and his or her
employment by the Company and the performance of his or her duties hereunder
will not violate or be a breach of any agreement with a former employer,
client or any other person or entity. Further, Employee agrees to indemnify
the Company for any claim, including, but not limited to, attorneys' fees,
costs and expenses and expenses of investigation, by any such third party
that such third party may now have or may hereafter come to have against the
Company based upon or arising out of any non-competition agreement,
invention or secrecy agreement between Employee and such third party which
was in existence as of the date of this Agreement.
11. Assignment; Change of Control; Binding Effect. Employee understands
---------------------------------------------
that he or she has been selected for employment by the Company on the basis
of his or her personal qualifications, experience and skills. Employee
agrees, therefore, he or she cannot assign all or any portion of his or her
performance under this Agreement. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns. In the
event that (i) the Company assigns its rights and obligations under this
Agreement to an entity that is not an affiliate of the Company, or (ii) all
or substantially all of the Company's assets or greater than fifty percent
(50%) of the outstanding voting stock of the Company are sold (whether by
merger, tender offer, consolidation, sale of assets or otherwise) (each a
"Change of Control"), Employee shall have the right to terminate this
Agreement upon the effective date of such Change of Control and Employee
shall receive, in one lump sum payment, the greater of (a) his annual base
salary at the rate then in effect and (b) his base salary through the
expiration of the Initial Term or the Renewal Term, as the case may be.
12. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Employee has no oral representations, understandings or
agreements with the Company or any of its officers, directors or
representatives covering the same subject matter as this Agreement. This
Agreement is the final, complete and exclusive statement and expression of
the agreement between the Company and Employee and of all the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by evidence
of any prior or contemporaneous oral or written agreements. This Agreement
may not be later modified except by a further writing signed by a duly
authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
13. Notice. Whenever any notice is required hereunder, it shall be
------
given in writing addressed as follows:
To the Company: United Road Services, Inc.
8 Automation Lane
Albany, NY 12205
Attention: Chief Operating Officer
with a copy to: McDermott, Will & Emery
600 13th Street, N.W.
Washington, D.C. 20005
Attention: Karen A. Dewis
<PAGE>
To Employee: Robert Joseph Adams, Jr.
3525 Peidmont Road
7 Peidmont Center, Suite 500
Atlanta, GA 30305
Notice shall be deemed given and effective the earlier of either three (3)
days after the deposit in the U.S. mail of a writing addressed as above and
sent first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the
other party of such change in accordance with this Section 13.
14. Severability; Headings. In the event any court of competent
----------------------
jurisdiction shall determine that the scope, time or territorial
restrictions set forth herein 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 Section headings herein are for reference purposes only and are not
intended in any way to describe, interpret, define or limit the extent or
intent of the Agreement or of any part hereof.
15. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of New York.
16. 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.
Tab Set returned to previous setting.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
THE COMPANY
By: /s/ Edward T. Sheehan
----------------------------------------
Title: Chief Executive Officer
EMPLOYEE
/s/ Robert Joseph Adams, Jr.
-------------------------------------------
Robert Joseph Adams, Jr.
Statement re Computation of Per Share Earnings
UNITED ROAD SERVICES, INC.
Weighted Average Shares
Period ended June 30,1998
Three Months Six Months
- -----------------------------------------------------------------------
(91 days) (181 days)
Shares outstanding at beginning of period 2,822,736 2,604,000
January 1, 1998- Subscription agreement shares
issued - 188,976
January 1, 1998- Sale of shares to Board member - 29,760
May 1, 1998- Public offering of 6,600,000
common shares (61 days) 4,424,176 2,224,309
May 6, 1998- Issuance of 990,000 common shares
as offering overallotment shares
(56 days) 609,231 306,298
May 6, 1998- Issuance of 2,375,741 common
shares for acquisition of founding
companies (56 days) 1,461,994 735,036
June 12, 1998- Issuance of 212,023 common
shares for acquisition of 5L Corporation
(19 days) 44,269 22,257
<PAGE>
June 22, 1998- Issuance of 93,902 common
shares for acquisition of D&M Auto
Towing, Inc. (9 days) 9,287 4,669
June 29, 1998- Issuance of 35,956 common
shares for acquisition of Rouse's Body
Shop, Inc. (2 days) 790 397
June 30, 1998- Issuance of 22,023 common shares
for acquisition of Northshore Towing, Inc.
(1 day) 242 122
------- ------
Weighted average shares outstanding for basic
earnings per share 9,372,725 6,115,824
--------- ---------
<PAGE>
Weighted average shares outstanding for
basic earnings per share 9,372,725 6,115,824
Options outstanding at June 30, 1998:550,000
shares
Total exercise proceeds:$6,859,625
Average market value of Company
stock $17.22
Shares deemed issued 132,515 105,181
Warrants outstanding at June 30, 1998 :
117,789 shares
Exercise price : $13.00 per share
Average market value of Company
stock $17.22
Shares deemed issued 19,350 9,728
-------- ------
Total shares outstanding for fully diluted
earnings per share 9,524,590 6,230,733
---------- ---------
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001056562
<NAME> UNITED ROAD SERVICES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 40,931
<SECURITIES> 0
<RECEIVABLES> 5,835
<ALLOWANCES> 964
<INVENTORY> 0
<CURRENT-ASSETS> 48,523
<PP&E> 18,987
<DEPRECIATION> 339
<TOTAL-ASSETS> 133,736
<CURRENT-LIABILITIES> 9,886
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 121,870
<TOTAL-LIABILITY-AND-EQUITY> 133,736
<SALES> 8,468
<TOTAL-REVENUES> 8,468
<CGS> 5,984
<TOTAL-COSTS> 8,314
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114
<INCOME-PRETAX> 517
<INCOME-TAX> 292
<INCOME-CONTINUING> 225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
