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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 QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ____________
COMMISSION FILE NUMBER 000-24019
UNITED ROAD SERVICES, INC.
--------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3278455
-------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17 COMPUTER DRIVE WEST
ALBANY, NEW YORK 12205
---------------- -----
(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
--- ---
As of October 31, 1999, the registrant had 17,839,090 shares of common
stock issued and outstanding.
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<PAGE>
UNITED ROAD SERVICES, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
INDEX PAGE
PART I. - FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended
September 30, 1999 and September 30, 1998 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1999 and
September 30, 1998 5
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3 Quantitative and Qualitative Disclosures about Market Risk 21
PART II. - OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds 22
Item 3 Defaults under Senior Securities 22
Item 5 Other Information 22
Item 6 Exhibits and Reports on Form 8-K 22
SIGNATURES 24
<PAGE>
<TABLE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
ASSETS SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents $ 3,395 3,381
Trade receivables, net of allowance for doubtful
accounts of $2,281 and $1,132, at September 30, 1999
and December 31, 1998, respectively 27,454 16,440
Other receivables 588 1,495
Prepaid income taxes 2,299 465
Prepaid expenses and other current assets 2,179 1,752
Current portion of rights to equipment under finance contracts 492 547
-------- --------
Total current assets 36,407 24,080
Vehicles and equipment, net 81,683 46,814
Rights to equipment under finance contracts, excluding current portion 1,614 2,025
Deferred financing costs, net 4,578 3,552
Goodwill, net 218,321 171,953
Deferred tax asset 3,506 --
Other non-current assets 15 308
-------- --------
Total assets $346,124 248,732
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of obligations under capital leases $ 335 338
Current installments of obligations for equipment under
finance contracts 492 547
Notes payable 11 17
Borrowings under credit facility 50,650 --
Accounts payable 7,120 6,904
Accrued expenses 8,685 4,690
Due to related parties 65 2,254
-------- --------
Total current liabilities 67,358 14,750
Obligations under capital leases, excluding current installments 458 698
Obligations for equipment under finance contracts, excluding
current installments 1,614 2,025
Long-term debt 79,292 62,532
Deferred income taxes 10,547 4,961
-------- --------
Total liabilities 159,269 84,966
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock; 5,000,000 shares authorized; no shares
issued or outstanding -- --
Common stock, $0.001 par value; 35,000,000 shares
authorized; 17,839,090 and 15,707,085
shares issued and outstanding at September 30, 1999
and December 31, 1998, respectively 18 16
Additional paid-in capital 183,826 159,532
Retained earnings 3,011 4,218
-------- --------
Total stockholders' equity 186,855 163,766
-------- --------
Total liabilities and stockholders' equity $346,124 248,732
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUE $ 64,150 36,374 189,085 44,842
Cost of revenue 50,207 25,867 140,191 31,343
Amortization of goodwill 1,472 694 4,266 883
Depreciation 2,579 969 6,543 1,308
Selling, general and administrative expenses 10,397 4,738 27,970 6,875
Special charges 1,138 -- 1,873 --
-------- -------- -------- --------
Income (loss) from operations (1,643) 4,106 8,242 4,433
OTHER INCOME (EXPENSE):
Interest income 3 138 12 615
Interest expense (includes $624 of deferred financing
costs written off for the periods ended September 30, 1999) (3,353) (412) (7,984) (526)
Other (7) 61 (137) (112)
-------- -------- -------- --------
Income (loss) before income taxes (5,000) 3,893 133 4,410
INCOME TAX (BENEFIT) EXPENSE (1,313) 1,923 1,340 2,215
-------- -------- -------- --------
Net income (loss) $ (3,687) 1,970 (1,207) 2,195
======== ======== ======== ========
PER SHARE AMOUNTS:
Basic earnings (loss) $ (.22) .14 (.07) .25
======== ======== ======== ========
Diluted earnings (loss) $ (.22) .14 (.07) .25
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
<CAPTION>
SEPTEMBER 30,
1999 1998
----- ----
<S> <C> <C>
NET INCOME (LOSS) $ (1,207) 2,195
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation 6,543 1,308
Amortization of goodwill 4,266 883
Amortization of deferred financing costs 1,120 96
Provision for doubtful accounts 1,333 --
Deferred income taxes 2,080 516
Interest expense, paid-in-kind 4,060 --
Loss on sale of vehicles and equipment, net 200 --
Changes in operating assets and liabilities, net of effects of
acquisitions:
Increase in trade receivables (6,125) (3,994)
Decrease (increase) in other receivables 1,238 1,081
Decrease in prepaid expenses and
other current assets 96 79
Increase in other non-current assets 293 (186)
Increase (decrease) in accounts payable (2,602) 2,367
Increase in accrued expenses 2,329 (127)
Increase (decrease) in income taxes payable (2,605) 616
-------- --------
Net cash provided by operating activities 11,019 4,834
-------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (37,774) (95,336)
Deposit on vehicles (1,674) --
Purchases of vehicles and equipment (16,034) (5,127)
Proceeds from sale of vehicles and equipment 711 --
Increase (decrease) amounts payable to related parties (2,221) 2,106
-------- --------
Net cash used in investing activities (56,992) (98,357)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of registration costs (313) 90,982
Proceeds from issuance of convertible subordinated debentures 31,500 --
Borrowings on revolving credit facility 65,850 26,000
Repayments of revolving credit facility (34,000) --
Payments of deferred financing costs (2,146) (622)
Payments on long-term debt and capital leases assumed
in acquisitions (14,904) (20,597)
-------- --------
Net cash provided by financing activities 45,987 95,763
-------- --------
Increase in cash and cash equivalents 14 2,240
Cash and cash equivalents at beginning of period 3 ,381 50
-------- --------
Cash and cash equivalents at end of period $ 3,395 2,290
======== ========
(continued)
<PAGE>
UNITED ROAD SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
<S> <C> <C>
Interest $ 2,516 169
======== ========
Income taxes $ 1,870 --
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITY:
Issuance of common stock for acquisitions $ 24,609 54,215
======== ========
Warrant issued to lender as partial loan fee $ -- 471
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) INTERIM FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures, normally included in
annual consolidated financial statements prepared in
accordance with generally accepted accounting principles, have
been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the
disclosures made are adequate to make the information
presented not misleading. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments,
necessary to fairly present the financial position, results of
operations and cash flows have been included. The results of
operations for the interim periods are not necessarily
indicative of the results for the entire fiscal year.
It is suggested that these condensed consolidated financial
statements be read in conjunction with the audited
consolidated financial statements and notes thereto included
in United Road Services, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1998, as filed with the SEC.
(b) ORGANIZATION AND BUSINESS
United Road Services, Inc., a Delaware corporation (the
"Company"), was formed in July 1997 to become a leading
provider of transport, towing and recovery services. As such,
it has a limited combined operating history and its future
success is dependent upon a number of factors which include,
among others, the ability to successfully integrate acquired
operations, the ability to achieve administrative and
operating cost savings, the availability of capital to finance
its operations, and the ability to attract and retain quality
management.
From inception through September 30, 1999, the Company has
acquired 56 businesses (the "Acquisitions"), seven of which
(the "Founding Companies") were acquired on May 6, 1998
simultaneously with the consummation of an initial public
offering (the "Offering") of the Company's common stock (the
"Common Stock"). All of these Acquisitions were accounted for
utilizing the purchase method of accounting.
(c) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements
include the accounts of the Company and its subsidiaries. The
results of operations of the Acquisitions have been included
in the Company's results of operations from their respective
acquisition dates. All significant intercompany transactions
have been eliminated in consolidation.
(d) USE OF ESTIMATES
Management of the Company 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.
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
(1) CONTINUED
(e) PER SHARE AMOUNTS
Basic earnings (loss) per share is computed by dividing income
(loss) available to common stockholders by the weighted
average number of common shares outstanding for the period.
Diluted earnings (loss) 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 (loss) of the Company (such as stock options,
warrants and convertible subordinated debentures).
THE FOLLOWING TABLE PROVIDES CALCULATIONS OF BOTH BASIC AND DILUTED
EARNINGS (LOSS) PER SHARE:
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------
WEIGHTED PER
NET AVERAGE SHARE
INCOME (LOSS) SHARES AMOUNTS
------------- ------ -------
<S> <C> <C> <C>
Basic $ (3,687,000) 17,089,000 $ (.22)
============ ========== ======
Diluted $ (3,687,000) 17,089,000 $ (.22)
============ ========== ======
THREE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------
WEIGHTED PER
NET AVERAGE SHARE
INCOME SHARES AMOUNTS
------ ------ -------
<S> <C> <C> <C>
Basic $ 1,970,000 14,079,898 $ .14
========== ========== =======
Diluted $ 1,970,000 14,267,622 $ .14
========== ========== =======
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------
WEIGHTED PER
NET AVERAGE SHARE
INCOME (LOSS) SHARES AMOUNTS
------------- ------ -------
<S> <C> <C> <C>
Basic $ (1,207,000) 16,882,451 $ (.07)
============ ========== =========
Diluted $ (1,207,000) 16,882,451 $ (.07)
============ ========== =========
NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
WEIGHTED PER
NET AVERAGE SHARE
INCOME SHARES AMOUNTS
------ ------ -------
<S> <C> <C> <C>
Basic $ 2,195,000 8,799,686 $ .25
========== ========= =======
Diluted $ 2,195,000 8,937,442 $ .25
========== ========= =======
</TABLE>
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
The impact of the Company's outstanding stock options,
warrants, convertible subordinated debentures and shares held
in escrow has been excluded at September 30, 1999, as the
effect would be antidilutive.
(f) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which established accounting and reporting
standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities. Statement No. 133 has subsequently been
amended by Financial Accounting Standards Board Statement No.
137 which delays the effective date for implementation of
Statement No. 133 until fiscal quarters of fiscal years
beginning after June 15, 2000. Management is currently
evaluating the impact of Statement No. 133 on the Company's
consolidated financial statements.
(g) RECLASSIFICATIONS
Certain reclassifications of the prior period unaudited
interim consolidated financial statements have been made to
conform to the current period presentation.
(2) STOCKHOLDERS' EQUITY
During the period from January 1, 1999 to September 30, 1999, the
Company acquired 15 businesses using a combination of Common Stock and
cash. The total number of shares issued in connection with these
acquisitions was 2,083,287, valued at $32.8 million.
(3) DUE TO RELATED PARTIES
The Company is obligated to make certain earn-out payments to the
former owners of the Founding Companies and one other acquired company.
For each of the years 1998 through 2002, the Company will be required
to make an earn-out payment to the former owners of each of these
companies that achieves certain net revenue targets. The net revenue
target for 1998 was generally 110% of 1997 net revenue of the
particular company, and for the years 1999 through 2002 the net revenue
target is 110% of the greater of the prior year's actual net revenue or
target net revenue. If the net revenue target is achieved for a
particular year, an initial payment, generally equal to 5% of the
excess of actual net revenue over the net revenue target, is due. In
addition, upon achievement of the net revenue target for a particular
year, subsequent and equal payments will also be due for each year
through 2002, provided that the actual net revenue for the respective
subsequent year exceeds the actual net revenue for the year that the
net revenue target was first achieved. At December 31, 1998, the
Company recorded additional goodwill and a liability within accrued
expenses on the accompanying condensed consolidated balance sheets in
the amount of $362,000 to reflect earn-out payments due. There were no
earnout payments due at September 30, 1999.
(4) DEBT
As of September 30, 1999, the Company had a total of $54.2 million,
including letters of credit of $3.5 million, outstanding under its
revolving credit facility (the "Credit Facility"). As of the end of the
third quarter of 1999, the Company was in violation of the covenants in
the Credit Facility relating to minimum consolidated net income and
minimum ratio of net income plus interest, tax and rental expense to
interest expense plus rental expense. In November 1999, the Company
received a temporary waiver of these defaults through February 29, 2000
(at which time there will be an immediate event of default and, absent
a further waiver or amendment, all amounts due thereunder will be
subject to acceleration at the banks' discretion). Based upon
discussions with the banks, the Company does not expect the banks to
accelerate repayment of outstanding balances under the Credit Facility.
However, pending resolution of this matter and as required by generally
accepted accounting principles, outstanding borrowings under the Credit
Facility have been classified as a current liability in the Company's
September 30, 1999 condensed consolidated balance sheet.
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
In connection with the November 1999 waiver, the Credit Facility was
amended to strengthen certain financial covenants and to accommodate
and acknowledge the recent management changes. The Company and the
banks also agreed to decrease the commitment amount of the facility to
$65.0 million and to decrease the amount available for borrowing to
$58.0 million through December 31, 1999 and $55.0 million after January
1, 2000.
On March 16, 1999, the Company issued $31.5 million aggregate principal
amount of the Company's 8% convertible subordinated debentures due 2008
(the "Debentures") to Charter URS LLC ("Charterhouse"). This was the
second closing under a Purchase Agreement with Charterhouse providing
for the issuance of up to $75.0 million aggregate principal amount of
Debentures. The Debentures accrue interest at the rate of 8% per annum,
which interest is payable in additional Debentures through 2003.
Thereafter, the Company has the option to pay interest in cash or to
continue paying interest in additional Debentures. As of September 30,
1999, the Company had $79.3 million aggregate principal amount of
Debentures outstanding. Any acceleration of amounts outstanding under
the Company's Credit Facility would constitute a default under the
Debentures.
(5) SPECIAL CHARGES
In September 1999, the Company recorded a special charge of $1.1
million relating to the strategic decision not to pursue its
acquisition program in the near term. This charge represents
professional fees and compensation contractually required to be paid in
connection with the termination of certain acquisition consultants.
This compensation accrual is included in accrued expenses in the
accompanying condensed consolidated balance sheet as of September 30,
1999.
In June 1999, the Company recorded a special charge of $735,000
relating to the resignation of its then Chairman and Chief Executive
Officer. This charge consisted of guaranteed compensation and related
fringe benefits and is included in accrued expenses in the accompanying
condensed consolidated balance sheet as of September 30, 1999.
(6) INTEREST EXPENSE
In September 1999, the Company expensed $624,000 of deferred financing
costs as a result of the termination of its $225.0 million revolving
credit agreement. For the three and nine month periods ended September
30, 1999, this write off has been recorded in interest expense in the
accompanying condensed consolidated statements of operations.
(7) SEGMENT AND RELATED INFORMATION
The Company's divisions operate under a common management structure
that evaluates each division's performance. The Company's divisions
have been aggregated into two reportable segments: (1) transport and
(2) towing and recovery. The reportable segments are considered by
management to be strategic business units that offer different services
and each of whose respective long-term financial performance is
affected by similar economic conditions.
The transport segment provides transport services to a broad range of
customers in the new and used vehicle markets. The towing and recovery
segment provides towing, impounding and storing services for motor
vehicles, lien sales and auto auctions of abandoned vehicles. In
addition, the towing and recovery segment provides recovery and
relocation services for heavy-duty commercial vehicles and construction
equipment.
The accounting policies of each of the segments are the same as those
of the Company, as outlined in note 1 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998. Certain amounts have
been reclassified for consistent presentation. For the year ended
December 31, 1998, the Company's first year of operations, the Company
evaluated the performance of its operating segments based on income
before income taxes. During the period ended September 30, 1999,
management has determined that a more appropriate measure of the
performance of its operating segments may be made through an evaluation
of the Company's income from operations. Accordingly, the Company's
summarized segment financial information is presented
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
below on the basis of income from operations for the three and nine
month periods ended September 30, 1999 and 1998. Inter-segment
revenues and transfers are not significant
Summarized financial information concerning the Company's reportable
segments is shown in the following tables:
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------
TOWING AND
TRANSPORT RECOVERY OTHER TOTAL
--------- -------- ----- -----
<S> <C> <C> <C> <C>
Net revenues from external customers $ 38,437 25,713 - 64,150
Cost of revenue, including depreciation 31,585 21,201 - 52,786
Income (loss) from operations 1,859 599 (4,101) (1,643)
THREE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------
TOWING AND
TRANSPORT RECOVERY OTHER TOTAL
--------- -------- ----- -----
<S> <C> <C> <C> <C>
Net revenues from external customers $ 19,705 16,669 - 36,374
Cost of revenue, including depreciation 15,263 11,573 - 26,836
Income from operations 2,871 2,509 (1,274) 4,106
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------
TOWING AND
TRANSPORT RECOVERY OTHER TOTAL
--------- -------- ----- -----
<S> <C> <C> <C> <C>
Net revenues from external customers $ 115,108 73,977 - 189,085
Cost of revenue, including depreciation 88,842 57,892 - 146,734
Income from operations 13,137 4,636 (9,531) 8,242
NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
TOWING AND
TRANSPORT RECOVERY OTHER TOTAL
--------- -------- ----- -----
<S> <C> <C> <C> <C>
Net revenues from external customers $ 25,160 19,682 - 44,842
Cost of revenue, including depreciation 18,926 13,725 - 32,651
Income from operations 4,011 2,822 (2,400) 4,433
</TABLE>
The following are reconciliations of the information used by the chief
operating decision-maker to the Company's consolidated totals.
<TABLE>
THREE MONTHS ENDED
SEPTEMBER 30,
RECONCILIATION OF INCOME (LOSS) BEFORE INCOME TAXES: 1999 1998
---- ----
<S> <C> <C>
Total profit from reportable segments $ 2,458 5,380
Unallocated amounts:
Interest expense, net (3,350) (274)
Other selling, general and
administrative costs (4,101) (1,274)
Other income (expense) (7) 61
----------- ----------
Income (loss) before income taxes $ (5,000) 3,893
======== ==========
</TABLE>
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
<TABLE>
NINE MONTHS ENDED
SEPTEMBER 30,
RECONCILIATION OF INCOME BEFORE INCOME TAXES: 1999 1998
---- ----
<S> <C> <C>
Total profit from reportable segments $ 17,773 6,833
Unallocated amounts:
Interest income (expense), net (7,972) 89
Other selling, general and
administrative costs (9,531) (2,400)
Other expenses, net (137) (112)
--------- -----------
Income before income taxes $ 133 4,410
========== ===========
</TABLE>
(7) ACQUISITIONS
On May 6, 1998, the Company acquired the seven businesses referred to
as the Founding Companies. Between May 7, 1998 and September 30, 1999,
the Company acquired 49 other businesses for aggregate consideration
(excluding assumed indebtedness) of approximately $111.0 million in
cash and 5,001,895 shares of Common Stock with a recorded value of
$81.4 million. The acquired companies are located throughout the United
States, with the majority located in the Western region of the country.
These companies are engaged in the business of motor vehicle and
equipment towing, recovery and transport services. The acquisitions
have been accounted for using the purchase method of accounting. The
excess of the purchase price over the fair value of the assets
acquired, including certain direct costs associated with the
acquisitions, of $224.3 million has been recorded as goodwill and is
being amortized on a straight-line basis over 40 years.
The following unaudited pro forma financial information presents the
combined results of operations of the Company as if all the
acquisitions that were completed through September 30, 1999 had
occurred as of January 1, 1998, after giving effect to certain
adjustments, including amortization of goodwill, additional
depreciation expense, agreed-upon reductions in salaries and bonuses to
former owners/shareholders and related income tax effects. This pro
forma financial information does not necessarily reflect the results of
operations that would have occurred had a single entity operated during
such periods.
<TABLE>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Net revenue $ 204,224 283,278
========= ========
Net income (loss) $ (450) 15,179
========== ========
Basic net income (loss) per share $ (0.03) 0.89
========== ========
Diluted net income (loss) per share $ (0.03) 0.85
========== ========
</TABLE>
<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
condensed consolidated 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 its 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 ability to integrate acquired
companies, changes in the general level of demand for towing and transport
services, price changes in response to competitive factors, seasonal and
event-driven variations in the demand for towing and transport services, the
availability of capital to fund operations, including expenditures for new
equipment, and other risk factors described from time to time in the Company's
reports filed with the Securities and Exchange Commission (the "Risk Factors").
All statements herein that are not statements of historical fact are
forward-looking statements. Although management believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that those expectations will prove to have been correct. Certain other
important factors that could cause actual results to differ materially from
management's expectations ("Cautionary Statements") are disclosed in this
report. All written forward-looking statements by or attributable to management
in this report are expressly qualified in their entirety by the Risk Factors and
the Cautionary Statements. Investors must recognize that events could turn out
to be significantly different from what management currently expects.
OVERVIEW
United Road Services, Inc. ("United Road" or the "Company") offers a broad
range of towing, recovery and transport services. These services include:
towing, impounding and storing motor vehicles; conducting lien sales and
auctions of abandoned vehicles; recovering heavy-duty commercial and
recreational vehicles; towing heavy equipment; and transporting new and used
vehicles. 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 related impounding and storage fees. If
an impounded vehicle is not claimed within a period prescribed by law (typically
between 30 and 90 days), the Company initiates and completes lien proceedings
and the vehicle is sold at auction or to a scrap metal facility, depending on
the value of the vehicle. Depending on the jurisdiction, the Company may either
keep all the proceeds from the vehicle sales, or keep the proceeds up to the
amount of the towing and storage fees and pay the remainder to the municipality
or law enforcement agency. Services are provided in some cases under contracts
with towing and transport customers. In other cases, services are provided to
towing and transport customers without a long-term contract. The prices charged
for towing and storage of impounded vehicles for municipalities or law
enforcement agencies are limited by contractual provisions or local regulation.
Cost of revenue consists primarily of the following: salaries and benefits
of drivers, dispatchers, supervisors and other employees; fees charged by
subcontractors; fuel; depreciation, repairs and maintenance; insurance; parts
and supplies; other vehicle expenses; and equipment rentals.
Selling, general and administrative expenses consist primarily of the
following: compensation and benefits to sales and administrative employees; fees
for professional services; depreciation of administrative equipment and
software; advertising; and other general office expenses.
In the case of law enforcement and private impound towing, payment is
obtained either from the owner of the impounded vehicle when the owner claims
the vehicle or from the proceeds of lien sales, scrap sales or auctions. With
respect to other operations, customers are billed upon completion of services
provided, with payment generally due within 30 days. Revenue is recognized as
follows: towing and recovery revenue is recognized at the completion of each
<PAGE>
engagement; transport revenue is recognized upon the delivery of the vehicle or
equipment to its final destination; revenue from lien sales or auctions is
recognized when title to the vehicle has been transferred; and revenue from
scrap Expenses related to the generation of revenue are recognized as incurred.
At the time of its initial public offering in May 1998, the Company
acquired the seven Founding Companies. Between May 7, 1998 and December 31,
1998, the Company acquired a total of 34 additional towing, recovery and
transport businesses. Between January 1, 1999 and September 30, 1999, the
Company acquired 15 additional towing, recovery and transport businesses.
RESULTS OF OPERATIONS
For the three months and nine months ended September 30, 1999, the
Company's results of operations were derived from 22 transport businesses and 34
towing and recovery businesses acquired prior to September 30, 1999. For the
three months and nine months ended September 30, 1998, the Company's results of
operations were derived from four transport businesses and eight towing and
recovery businesses acquired prior to September 30, 1998.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
The following tables set forth selected statement of operations data by
segment and for the Company as a whole, as well as such data as a percentage of
net revenue, for the periods indicated:
<TABLE>
Three months ended September 30, 1999
(Dollars in thousands)
Transport Towing and Recovery Total
------------------------- ------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue $38,437 100.0 % $25,713 100.0 % $64,150 100.0%
Cost of revenue, including
depreciation 31,585 82.2 21,201 82.5 52,786 82.3
Amortization of goodwill 791 2.1 657 2.5 1,472 2.3
Selling, general and
administrative expenses 4,202 10.9 3,256 12.7 10,397 16.2
Special charges - - - - 1,138 1.8
------------------------ -------------------------- ------------------
Income (loss) from operations $ 1,859 4.8 % $ 599 2.3 % (1,643) (2.6)
========================== ==========================
Interest expense, net 3,350 5.2
Other expenses, net 7 -
------------------
Loss before income taxes (5,000) (7.8)
Income tax benefit 1,313 (2.0)
------------------
Net loss $(3,687) (5.8) %
======================
</TABLE>
<TABLE>
Three months ended September 30, 1998
(Dollars in thousands)
Transport Towing and Recovery Total
------------------------- ------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue $19,705 100.0 % $16,669 100.0 % $36,374 100.0%
Cost of revenue, including
depreciation 15,263 77.5 11,573 69.4 26,836 73.8
Amortization of goodwill 244 1.2 446 2.7 694 1.9
Selling, general and
administrative expenses 1,327 6.7 2,141 12.8 4,738 13.0
Special charges - - - - - -
------------------------ -------------------------- ------------------
Income from operations $ 2,871 14.6 % $ 2,509 15.1 % 4,106 11.3
======================== ==========================
Interest expense, net 274 0.8
Other income, net (61) (0.2)
------------------
Income before income taxes 3,893 10.7
Income tax expense 1,923 5.3
------------------
Net income $ 1,970 5.4 %
======================
</TABLE>
<PAGE>
Net Revenue. Net revenue increased $27.8 million, or 76.4%, from $36.4
million for the three-month period ended September 30, 1998 to $64.2 million for
the three-month period ended September 30, 1999. Of the net revenue for the
three-month period ended September 30, 1999, 59.9% related to transport services
and 41.1% related to towing and recovery services. Transport net revenue
increased $18.7 million, or 94.9%, from $19.7 million for the three-month period
ended September 30, 1998 to $38.4 million for the three-month period ended
September 30, 1999, and towing and recovery net revenue increased $9.0 million,
or 53.9%, from $16.7 million for the three-month period ended September 30, 1998
to $25.7 million for the three-month period ended September 30, 1999. The
increase in revenue was largely due to the inclusion of revenue from companies
acquired in the last quarter of 1998 and the first three quarters of 1999,
offset in part by the negative impact of annual new car model changeovers on
transport revenues.
Cost of Revenue. Cost of revenue, including depreciation, increased $26.0
million, or 97.0%, from $26.8 million for the three-month period ended September
30, 1998 to $52.8 million for the three-month period ended September 30, 1999.
Transport cost of revenue increased $16.3 million, or 106.5%, from $15.3 million
for the three-month period ended September 30, 1998 to $31.6 million for the
three-month period ended September 30, 1999, and towing and recovery cost of
revenue increased $9.6 million, or 82.8%, from $11.6 million for the three-month
period ended September 30, 1998 to $21.2 million for the three-month period
ended September 30, 1999. The increase in cost of revenue was primarily due to
the increase in size of the Company's operations, and an overall increase in
miscellaneous vehicular expenses, and wage and insurance costs during 1999.
Amortization of Goodwill. Amortization of goodwill increased $778,000 from
$694,000 for the three-month period ended September 30, 1998 to $1.5 million for
the three-month period ended September 30, 1999. This increase in goodwill
amortization was the result of higher intangible asset balances resulting from
the acquisitions described above. The excess purchase price over the fair value
of the assets acquired, including direct costs associated with the acquisitions,
was $138.4 million at September 30, 1998 and 224.3 million at September 30,
1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $5.7 million, or 121.3%, from $4.7 million for
the three-month period ended September 30, 1998 to $10.4 million for the
three-month period ended September 30, 1999. Transport selling, general and
administrative expenses increased $2.9 million, or 223.1%, from $1.3 million for
the three-month period ended September 30, 1998 to $4.2 million for the
three-month period ended September 30, 1999, and towing and recovery selling,
general and administrative expenses increased $1.2 million, or 57.1%, from $2.1
million for the three-month period ended September 30, 1998 to $3.3 million for
the three-month period ended September 30, 1999. The increase in selling,
general and administrative expenses was primarily due to costs associated with
the acquisitions described above and costs associated with integrating and
managing the acquired companies, an overall increase in wage expense primarily
in the transport segment, increased bad debt expense, and increased computer
expense in both the transport, and towing and recovery business segments.
Special Charges. The Company recorded a special charge in September 1999
of $1.1 million relating to its strategic decision not to pursue its acquisition
program in the near term. This charge consisted of professional fees and
compensation contractually required to be paid in connection with the
termination of acquisition consultants.
Interest Expense. Interest expense increased $3.1 million, from $274,000,
for the three-months period ended September 30, 1998 to $3.3 million for the
three-months period ended September 30, 1999. This increase was related to
higher levels of debt incurred to finance the acquisitions described above, and
a charge of $624,000 in the three-month period ended September 30, 1999 relating
to the termination of the Company's $225.0 million credit agreement.
Income Tax Expense. Income tax decreased $3.2 million from an income tax
expense of $1.9 million for the three-months period ended September 30, 1998 to
an income tax benefit of $1.3 million for the three-months period ended
September 30, 1999. The decrease in income tax expense was largely due to the
net loss generated by the Company in the third quarter of 1999. The resulting
effective tax rate was a result of the decrease in earnings and the
non-deductibility of a portion of the Company's goodwill.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
The following tables set forth selected statement of operations data, and
such data as a percentage of net revenue for the segment indicated:
<TABLE>
Nine months ended September 30, 1999
(Dollars in thousands)
Transport Towing and Recovery Total
------------------------- ------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue $115,108 100.0 % $73,977 100.0 % $189,085 100.0%
Cost of revenue, including
depreciation 88,842 77.2 57,892 78.3 146,734 77.6
Amortization of goodwill 2,309 2.0 1,885 2.5 4,266 2.3
Selling, general and
administrative expenses 10,820 9.4 9,564 12.9 27,503 14.5
Special charges - - - - 2,340 1.2
------------------------ -------------------------- ------------------
Income from Operations $ 13,137 11.4 % $ 4,636 6.3 % 8,242 4.4
======================== ==========================
Interest expense, net 7,972 4.2
Other expenses, net 137 0.1
------------------
Income before income taxes 133 0.1
Income tax expense 1,340 0.7
------------------
Net loss $ (1,207) (0.6%
========================
</TABLE>
<TABLE>
Nine months ended September 30, 1998
(Dollars in thousands)
Transport Towing and Recovery Total
------------------------- ------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue $25,160 100.0 % $19,682 100.0 % $44,842 100.0%
Cost of revenue, including
depreciation 18,926 75.2 13,725 69.7 32,651 72.8
Amortization of goodwill 349 1.4 530 2.7 883 2.0
Selling, general and
administrative expenses 1,874 7.5 2,605 13.3 6,875 15.3
Special charge - - - - - -
------------------------ -------------------------- ------------------
Income from Operations $ 4,011 15.9 % $ 2,822 14.3 % 4,433 9.9
======================== ==========================
Interest income, net (89) (0.2)
Other expenses, net 112 0.3
------------------
Income before income taxes 4,410 9.8
Income tax expense 2,215 4.9
------------------
Net income $ 2,195 4.9 %
======================
</TABLE>
Net Revenue. Net revenue increased $144.3 million, or 322.1%, from $44.8
million for the nine-month period ended September 30, 1998 to $189.1 million for
the nine-month period ended September 30, 1999. Of the net revenue for the
nine-month period ended September 30, 1999, 60.9% related to transport services
and 39.1% related to towing and recovery services. Transport net revenue
increased $89.9 million, or 356.7%, from $25.2 million for the nine-month period
ended September 30, 1998 to $115.1 million for the nine-month period ended
September 30, 1999, and towing and recovery net revenue increased $54.3 million,
or 275.6%, from $19.7 million for the nine-month period ended September 30, 1998
to $74.0 million for the nine-month period ended September 30, 1999. The
increase in revenue was largely due
<PAGE>
to the inclusion of revenue from companies acquired in the last quarter of 1998
and the three quarters of 1999, offset in part by the negative impact of annual
new car model changeovers on transport revenues.
Cost of Revenue. Cost of revenue, including depreciation, increased $114.0
million, or 348.6%, from $32.7 million for the nine-month period ended September
30, 1998 to $146.7 million for to the nine-month period ended September 30,
1999. Transport cost of revenue increased $69.9 million, or 214.4%, from $18.9
million for the nine-month period ended $88.8 million for to the nine-month
period ended September 30, 1999, and towing and recovery cost of revenue
increased $44.2 million, or 332.6%, from $13.7 million for the nine-month period
ended September 30, 1998 to $57.9 million for to the nine-month period ended
September 30, 1999. The increase in cost of revenue was primarily due to the
increase in size of the Company's operations and an overall increase in
miscellaneous vehicular expense and wage costs during 1999.
Amortization of Goodwill. Amortization of goodwill increased $3.3 million
from $883,000 for the nine-month period ended September 30, 1998 to $4.3 million
for the nine-month period ended September 30, 1999. This increase in goodwill
amortization was the result of higher intangible asset balances resulting from
the acquisitions described above. The excess purchase price over the fair value
of the assets acquired, including direct costs associated with the acquisitions,
was $138.4 million at September 30, 1998 and $224.3 million at September 30,
1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $20.6 million, or 298.5%, from $6.9 million
for the nine-month period ended September 30, 1998 to $27.5 million for the
nine-month period ended September 30, 1999. Transport selling, general and
administrative expenses increased $8.9 million, or 468.4%, from $1.9 million for
the nine-month period ended September 30, 1998 to $10.8 million for the
nine-month period ended September 30, 1999, and towing and recovery selling,
general and administrative expenses increased $7.0 million, or 269.2%, from $2.6
million for the nine-month period ended September 30, 1998 to $9.6 million for
the nine-month period ended September 30, 1999. The increase in selling, general
and administrative expenses was primarily due to costs associated with the
acquisitions described above and costs associated with integrating and managing
the acquired companies, an increase in bad debt expense and computer expense in
both the transport, and towing and recovery business segments.
Special Charges. The Company recorded a special charge of $1.8 million for
the nine-months period ended September 30, 1999, consisting of $1.2 million
relating to its strategic decision not to pursue its acquisition program in the
near term. This charge consisted of professional fees and compensation
contractually obligated to be paid in connection with the termination of certain
acquisition consultants, and $735,000 associated with the resignation of the
Company's former Chairman and Chief Executive Officer in June of 1999.
Interest Expense. Interest expense increased $8.1 million, from interest
income of $89,000 for the nine-months period ended September 30, 1998 to
interest expense of $8.0 million for the nine-months period ended September 30,
1999. This increase was related to higher levels of debt incurred to finance the
acquisitions described above and a charge of $624,000 in the nine-month period
ended September 30, 1999 relating to the termination of the Company's $225.0
million credit agreement.
Income Tax Expense. Income tax decreased $900,000, or 40.9%, from $2.2
million for the nine-months period ended September 30, 1998 to $1.3 million for
the nine-months period ended September 30, 1999. The decrease in income tax was
largely due to the taxable income generated by the Company during 1999, along
with the utilization of tax credits for software development and tax deductions
for computer conversion costs.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had approximately:
o $3.4 million of cash and cash equivalents,
o a working capital deficit of approximately $31.0 million, and
o $130.4 million of outstanding indebtedness, excluding current
installments.
<PAGE>
During the nine months period ended September 30, 1999, the Company
generated $11.0 million of cash from operations. Cash provided by operations was
reduced by a net increase in receivables of $6.1 million and a net decrease in
accounts payable of $2.6 million, offset by depreciation of $6.5 million and
amortization of goodwill of $4.3 million. During the nine months period ended
September 30, 1999, the Company used $57.0 million of cash in investing
activities ($32.0 million of which related to acquisitions of businesses and
$17.7 million of which related to deposits and purchases associated with new
vehicles and equipment), and generated $46.0 million of cash through financing
activities. Financing activities consisted of payments on long-term debt and
capital lease obligations assumed in acquisitions of $14.9 million and payments
of deferred financing costs of $2.1 million, offset by proceeds from the
issuance to Charter URS, LLC ("Charterhouse") of $31.5 million aggregate
principal amount of the Company's 8% convertible subordinated debentures due
2008 (the "Debentures") and a net increase in borrowings under the Company's
credit facility of $21.9 million.
As of September 30, 1999, the Company had a credit facility (the "Credit
Facility") with a group of banks that had an aggregate borrowing limit of $90.0
million on a revolving basis. Approximately $54.2 million, including letters of
credit of $3.5 million, was outstanding under the Credit Facility as of
September 30, 1999. The Credit Facility terminates in October 2001, at which
time all outstanding indebtedness will be due. Borrowings under the Credit
Facility bear interest, at the Company's option, at a 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), plus an applicable margin. On June 14, 1999, the
Company and the banks signed an agreement in principle to expand the Credit
Facility to $225.0 million to provide financing for future acquisitions. This
agreement was terminated on September 24, 1999 when it was determined that there
would likely be a significant decline in the Company's acquisition activity in
the near term.
Obligations under the Credit Facility are guaranteed by the Company's
subsidiaries. The Company's obligations and the obligations of the Company's
subsidiaries under the Credit Facility and related guarantees are secured by
substantially all of the assets of the Company and its subsidiaries. Under the
Credit Facility, the Company must comply with various loan covenants, including
maintenance of certain financial ratios, restrictions on additional
indebtedness, restrictions on liens, guarantees, advances and dividends, and
prior bank group approval of certain acquisitions. The Credit Facility also
contains a provision requiring bank group approval of a new chief executive
officer within a stated period of time after the departure of an existing chief
executive officer.
As of September 30, 1999, the Company was in violation of the covenants in
the Credit Facility relating to minimum consolidated net income and the ratio of
net income plus interest, tax and rental expense (EBITR) to interest expense
plus rental expense. In November 1999, the Company received a temporary waiver
of these defaults through February 29, 2000 (at which time there will be an
immediate event of default and, absent a further waiver or amendment, all
amounts due thereunder will be subject to acceleration at the banks'
discretion). Based upon discussions with the banks, the Company does not expect
the banks to accelerate repayment of outstanding balances under the Credit
Facility. However, pending resolution of this matter and as required by
generally accepted accounting principles, outstanding borrowings under the
Credit Facility have been classified as a current liability in the Company's
September 30, 1999 condensed consolidated balance sheet. In connection with the
November 1999 waiver, the Credit Facility was amended to strengthen certain
financial covenants and to accommodate and acknowledge the Company's recent
management changes, including approval of the new chief executive officer. The
Company and the banks also agreed to decrease the commitment amount of the
Credit Facility to $65.0 million and to decrease the amount available for
borrowing to $58.0 million through December 31, 1999 and $55.0 million
after January 1, 2000.
In connection with the Credit Facility, the Company issued to Bank of
America a warrant to purchase 117,789 shares of Common Stock at an exercise
price of $13.00 per share, subject to adjustment as provided in the Warrant
Agreement. The warrant expires on June 16, 2003.
On November 19, 1998, the Company entered into a Purchase Agreement with
Charterhouse providing for the issuance to Charterhouse of up to $75.0 million
aggregate principal amount of Debentures. The Debentures are convertible into
Common Stock at any time, at Charterhouse's option, at an initial exercise price
of $15.00 per share, subject to adjustment as provided in the Purchase
Agreement. The conversion price exceeded the fair market value of the Common
Stock on the date of execution of the Purchase Agreement. Following five years
after the date of first issuance, the Debentures are redeemable at the Company's
option at 100% of their principal amount if the average closing price of the
Company's Common Stock exceeds 150% of the conversion price over a thirty day
period. The Company issued $43.5 million aggregate principal amount of
Debentures to Charterhouse at a first closing on December 7, 1998. The Company
issued the remaining $31.5 million aggregate principal amount of Debentures to
Charterhouse at a second closing on March 16, 1999. The Debentures bear interest
at a rate of 8% annually, payable in kind for the first five years following
issuance, and thereafter either in kind or in cash, at the Company's discretion.
During the nine month period ending
<PAGE>
September 30, 1999, the Company expensed $4.3 million in interest expense and
deferred financing fees related to the Debentures. Pursuant to the Purchase
Agreement, the Company paid Charterhouse a fee of 1% of the principal amount of
the Debentures issued at each closing. The Company also agreed to pay certain
fees and expenses incurred by Charterhouse in connection with the transaction.
Any acceleration of amounts outstanding under the Credit Facility would
constitute a default under the Debentures.
From inception of the Company through September 30, 1999, approximately
$10.1 million had been spent to develop and install the Company's integrated
financial and information systems. Although it is expected that the Company will
need to upgrade and expand these systems in the future, the Company cannot
currently quantify the amount that will be spent to do so.
The Company spent $16.0 million on purchases of vehicles and equipment
(including $6.2 million spent in connection with installation of information
systems) during the nine month period ended September 30, 1999. Other than
expenditures relating to the information systems, these expenditures were
primarily for transport and towing and recovery vehicles. During the nine month
period ended September 30, 1999, the Company made expenditures of $3.0 million
on towing and recovery vehicles and $6.7 million on transport vehicles. These
expenditures were financed primarily with cash flow from operations and debt.
During the first quarter of 1999, the Company committed to purchase up to 100
transport vehicles, for delivery at various times through the year 2000, and in
connection therewith made a deposit of approximately $1.6 million to the vehicle
manufacturer. The Company's ability to take delivery of these vehicles will
depend upon the availability of sufficient capital.
During the period from January 1, 1999 to September 30, 1999, the Company
acquired 15 businesses using a combination of Common Stock and cash. The total
number of shares issued in connection with these acquisitions was 2,083,287 with
a recorded fair value of $32.8 million. The cash portion of these acquisitions
was funded through proceeds from operations and long-term borrowings.
As of September 30, 1999, the Company had cash on hand of approximately
$3.4 million. The Company is in the process of implementing programs to decrease
operating and administrative costs and to reduce receivable balances and
expedite billing for services rendered. While there can be no assurance,
management expects that these initiatives will serve to strengthen the Company's
cash position. In the meantime the Company believes that it will be able to fund
its ongoing near-term liquidity needs through cash flow from operations, as long
as it does not experience significant decreases in revenues or increases in
costs. In the event the Company is unable to fund its ongoing liquidity needs
from cash flow from operations, it will be required to secure alternative
sources of capital. There can be no assurance that additional capital will be
available to the Company on satisfactory terms or at all.
SEASONALITY
The Company may experience significant fluctuations in its quarterly
operating results due to seasonal and other variations in the demand for towing,
recovery and transport services. Specifically, the demand for towing and
recovery services is generally highest in extreme weather, such as heat, cold,
rain and snow. Although the demand for automobile transport tends to be
strongest in the months with the mildest weather, since inclement weather tends
to slow the delivery of vehicles, the demand for automobile transport is also a
function of the timing and volume of lease originations, new car model
changeovers, dealer inventories and new and used auto sales.
GENERAL ECONOMIC CONDITIONS AND INFLATION
The Company's future operating results may be adversely affected by (i)
changes in general economic conditions, (ii) 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, (iii) the loss of significant customers or
contracts, (iv) risks related to the Company's ability to integrate acquired
companies,(v) changes in the general level of demand for towing and transport
services, (vi) price changes in response to competitive factors, (vii)
event-driven variations in the demand for towing and transport services and
(viii) availability of capital to fund operations, including expenditures for
new equipment. Although the Company 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>
YEAR 2000 READINESS
The "Year 2000 problem" exists because many computer programs, embedded
systems and components were designed to refer to a year by the last two digits
of the year, such as "99" for "1999." As a result, certain of these systems may
not properly recognize that the year that follows "1999" is "2000" and not
"1900." If the Year 2000 problems are not corrected, such systems could fail or
produce erroneous results. No one knows the extent of the potential impact of
the Year 2000 problem generally.
THE COMPANY'S STATE OF READINESS
In early 1999, the Company implemented an enterprise-wide Year 2000
readiness project consisting of five phases: assessment and impact analysis,
test planning, testing, remediation and contingency planning.
In the assessment and impact analysis phase, the Company identified
certain systems, equipment and applications, including embedded systems and
other "non-information technology" that are utilized in its towing and transport
operations, or in its finance, payroll and administration departments and that
are necessary to operate its business without disruption (the "Mission Critical
Systems"). These Mission Critical Systems include servers, desktop and notebook
computers, data and voice communications equipment, peripherals, network and
desktop operating systems (collectively "IT Infrastructure"), desktop
application suites, payroll and financial software, towing and transportation
applications and interfaces with the Company's financial systems. The Company
also identified certain other hardware and software, operating systems,
relationships and services utilized by the Company and its various divisions
that are not necessarily mission critical but are material to the Company's
day-to-day operations ("Important Functions").
The Company has distributed Year 2000 questionnaires to its significant
suppliers, customers, service providers and other business partners, in order to
attempt to assess the Year 2000 readiness of these entities and the possible
impact on the Company's operations if these entities were to experience Year
2000 problems. The Company has not yet received responses from over half of its
suppliers, customers service providers and other partners. While the Company
intends to continue to pursue such responses throughout the remainder of 1999,
there can be no assurance that responses from these third parties will be
forthcoming.
With respect to its Mission Critical Systems and Important Functions, the
Company has, with the assistance of its outside Year 2000 consultant, pursued a
combination of internal and external testing, website confirmations and third
party readiness statements and certifications to determine whether such systems
and functions are Year 2000 compliant.
Based upon such testing, confirmations, statements and certifications, the
Company believes that its Mission Critical Systems and Important Functions are
Year 2000 compliant in all material respects, with the following exceptions:
o Approximately 12 of the Company's transport and towing and recovery
divisions (representing approximately 25% of the Company's revenues for the
nine months period ended September 30, 1999) are in the process of
remediating their existing operational applications in order to achieve
Year 2000 compliance. All of such remediation is scheduled to be completed
in November 1999. If these operational applications are not remediated
prior to year end, the Company expects to implement a manual contingency
plan at these divisions, which generally consists of manual dispatch,
invoicing and collection.
o The Company has received website confirmation that its centralized
accounting software is Year 2000 compliant. The Company plans to confirm
the Year 2000 compliance of this software through internal testing based
upon a test plan provided by its outside Year 2000 consultant. This testing
is expected to take place during November 1999. If this software is
determined not to be Year 2000 compliant and cannot be remediated prior to
year end, the Company expects to implement a manual contingency plan with
respect to its centralized accounting functions.
o A significant number of the Company's transport and towing and recovery
divisions employ a widely used desktop application suite that requires an
upgrade in order to function properly in the Year 2000. Although there can
be no assurance that the third party developer will ensure Year 2000
compliance of this desktop application suite, the Company expects that
appropriate upgrades will be installed at all sites prior to December 31,
1999.
<PAGE>
CONTINGENCY PLANNING
The Company is in the process of developing and testing manual contingency
plans for its mission critical functions. Although there can be no assurance,
the Company believes it can perform all mission critical functions manually,
although not as efficiently. In the event that any of the Company's Important
Functions will not be Year 2000 ready by December 31, 1999, the Company will
identify, consider, and determine appropriate alternatives. The Company expects
that any such contingency plans will be implemented during the fourth quarter of
1999.
COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
From January 1, 1999 through September 30, 1999, the Company incurred costs
of approximately $6.2 million to develop and install its information systems
described above. Because the majority of these systems were identified and
selected during the latter half of 1998, management was able to take Year 2000
readiness into account in selecting hardware and software technologies that
would meet the Company's objectives. As a result, the Company has not incurred,
and does not expect to incur, material costs to upgrade or replace its
information systems to address Year 2000 issues. While management cannot
estimate with certainty the amount that will be required to achieve Year 2000
compliance for all of its systems and procedures, the Company currently expects
to incur up to $300,000 of consulting fees and other costs associated with its
Year 2000 readiness project during the remainder of 1999.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
Installation, testing or remediation of the Company's information and
operating systems may not be completed at all of its locations before December
31, 1999. In addition, there can be no assurance that the Company's systems,
when installed or remediated, will function properly in the Year 2000, or that
vendors and other service providers associated with such systems will be able to
correct any problems in a timely fashion. If the Company's information and
operating systems do not function properly in the Year 2000, the Company will be
required to perform all critical functions on a manual basis. Any resulting
inefficiency could have a material adverse effect on the Company's business,
financial condition and results of operations.
Because the Company has not yet received responses to its Year 2000
questionnaires from all of its business partners, it is uncertain as to whether
all of its business partners will be Year 2000 ready before December 31, 1999.
While management is unable to predict the impact that Year 2000 problems at
vendors, customers or financial institutions may have on the Company, it intends
to continue to address Year 2000 issues with its business partners, and will
implement contingency plans to the extent necessary.
The foregoing constitutes a Year 2000 statement and readiness disclosure
subject to the protections afforded it by the federal Year 2000 Information and
Readiness Disclosure Act of 1998.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes there have been no material changes in the Company's
interest rate risk position since December 31, 1998. Other types of market risk,
such as foreign exchange rate risk and commodity price risk, do not arise in the
normal course of the Company's business activities.
<PAGE>
PART II OTHER INFORMATION
-----------------
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES
On September 30, 1999, the Company issued approximately $1.6 million
aggregate principal amount of the Company's 8% Convertible Subordinated
Debentures due 2008 (the "Debentures") to Charter URS LLC ("Charterhouse"),
which represented the quarterly payment-in-kind interest payment due with
respect to $77.7 million aggregate principal amount of Debentures previously
issued to Charterhouse.
The sale of these securities was 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 a transaction by an issuer not involving
a public offering. The recipient of the securities was an accredited investor
and represented its 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 certificate issued in such transaction.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
As of September 30, 1999, the Company was in violation of the covenants in
its credit facility relating to minimum consolidated net income and the ratio of
EBITR to interest expense plus rental expense. In November 1999, the Company
received a temporary waiver of these defaults through February 29, 2000 (at
which time there will be an immediate event of default and, absent a further
waiver or amendment, all amounts due thereunder will be subject to acceleration
at the banks' discretion). Based upon discussions with the banks, the Company
does not expect the banks to accelerate repayment of outstanding balances under
the Credit Facility. However, pending resolution of this matter, and as required
by generally accepted accounting principles, outstanding borrowings under the
Credit Facility have been classified as a current liability in the Company's
September 30, 1999 condensed consolidated balance sheet. In connection with the
November 1999 waiver, the Credit Facility was amended to strengthen certain
financial covenants and to accommodate and acknowledge the Company's recent
management changes, including approval of the new chief executive officer. The
Company and the banks also agreed to decrease the commitment amount of the
Credit Facility to $65.0 million and to decrease the amount available for
borrowing to $58.0 million through December 31, 1999 and $55.0 million after
January 1, 2000.
ITEM 5 OTHER EVENTS
On October 11, 1999, the Company appointed Gerald R. Riordan as its new
Chief Executive Officer and a member of its Board of Directors. In addition,
Richard A. Molyneux assumed the position of Chairman of the Board of Directors
following the resignation from the Board of Donald F. Moorehead, Jr., the
previous Chairman, for personal reasons. Edward T. Sheehan also resigned from
the Company's Board of Directors during the third quarter of 1999.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.1 Executive Employment Agreement, dated as of October 11, 1999,
between Gerald R. Riordan and United Road Services, Inc.
10.2 Amended and Restated Executive Employment Agreement, dated as
of September 8, 1999, between Donald J. Marr and United Road
Services, Inc.
10.3 Termination Agreement dated as of September 24, 1999 among
United Road Services, Inc., various financial institutions and
Bank of America National Trust and Savings Association.
<PAGE>
10.4 Second Amendment dated as of November 12, 1999 to Amended and
Restated Credit Agreement dated as of November 2, 1998 among
United Road Services, Inc., various financial institutions and
Bank of America, N.A. (f/k/a Bank of America National Trust
and Savings Association), as Agent.
11.1 Statement of Computation of Earnings per Share.
27.1 Financial Data Schedule.
(B) REPORTS ON FORM 8-K
The Company filed the following report on Form 8-K during the quarterly
period ended September 30, 1999:
Current Report on Form 8-K, dated October 12, 1999 and filed October 20,
1999, to report under Item 5 that the Company had appointed Gerald R. Riordan as
its new Chief Executive Officer and a member of its Board of Directors and that
Richard A. Molyneux had assumed the position of Chairman of the Company's Board
of Directors following the resignation from the Board of Donald F. Moorehead,
Jr., for personal reasons. The Company also reported the termination of its
previously announced $225.0 million senior secured credit facility, the
retention of a management consulting firm and an anticipated loss for the third
quarter of 1999.
<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: November 15, 1999 /s/ Gerald R. Riordan
-----------------------
Chief Executive Officer
/s/ Donald J. Marr
Donald J. Marr
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
10.1 Executive Employment Agreement, dated as of October 11, 1999,
between Gerald R. Riordan and United Road Services, Inc.
10.2 Amended and Restated Executive Employment Agreement, dated as
of September 8 1999, between Donald J. Marr and United Road
Services, Inc.
10.3 Termination Agreement dated as of September 24, 1999 among
United Road Services, Inc., various financial institutions
and Bank of America National Trust and Savings Association.
10.4 Second Amendment dated as of November 12, 1999 to Amended and
Restated Credit Agreement dated as of November 2, 1998 among
United Road Services, Inc., various financial institutions and
Bank of America, N.A. (f/k/a Bank of America National Trust
and Savings Association), as Agent.
11.1 Statement of Computation of Earnings per Share.
27.1 Financial Data Schedule.
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and entered
into as of October 11, 1999 (the "Effective Date") by and between United Road
Services, Inc., a Delaware corporation (the "Company") and Gerald R.
Riordan, an individual resident of the State of Colorado ("Executive").
RECITALS
WHEREAS, the Company is engaged in the business of motor vehicle and
equipment towing, recovery and transport services (the "Business");
WHEREAS, the Company desires to employ Executive on a full-time basis
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; and
WHEREAS, Executive is employed hereunder by the Company in a
confidential relationship wherein Executive, in the course of his 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 have 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.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, 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.
2. Duties. During the period of his employment with the Company
hereunder, Executive will be employed as Chief Executive 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 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.
3. Compensation.
(a) Base Salary and Bonus. In consideration of Executive's
services to the Company during the Employment Term, the
Company will pay Executive a gross base salary of $300,000 per
annum during the employment term. 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
<PAGE>
withhold from such compensation all applicable federal and
state income, social security, disability and other taxes as
required by applicable laws. On at least an annual basis, the
Compensation Committee of the Board of Directors (the
"Compensation Committee") will review Executive's performance
and may increase such base salary if, in its discretion, any
such increase is warranted. The Company may also pay Executive
such bonuses and other incentive compensation, including
without limitation, stock options, as are determined from time
to time to be appropriate by the Compensation Committee or
another duly authorized committee of the Board of Directors
based upon the satisfaction of performance targets established
by such committee at the beginning of each year; provided,
that the annual cash bonus payable to Executive hereunder
shall not exceed 100% of Executive's gross base salary in any
given year; and provided further that, as long as Executive
continues to be employed by the Company as of December 31,
1999, Executive shall be entitled to a guaranteed bonus for
fiscal 1999 equal to $50,000 in cash plus the number of shares
of unregistered common stock of the Company determined by
dividing $50,000 by the closing price of the Company's common
stock, as reported by the Nasdaq Stock Market National Market,
on December 31, 1999.
(b) Stock Options. As an inducement essential to Executive
entering into this Agreement, on the Effective Date, pursuant
to the Non-Qualified Stock Option attached hereto as Exhibit
A, the Company shall grant to Executive options to purchase
750,000 shares of the Company's common stock at an exercise
price equal to the closing price of the Company's common
stock, as reported by the Nasdaq Stock Market National Market,
on the Effective Date, which options shall vest in increments
of 33-1/3% per year beginning on the first anniversary of the
date of grant.
4. Change of Control.
(a) Operation of Section 4. This Section 4 shall be effective, but
not operative, immediately upon execution of this Agreement by
the parties hereto and shall remain in effect so long as
Executive remains employed by the Company, but shall not be
operative unless and until there has been a Change of Control,
as defined in subsection 4(b) hereof. Upon such Change of
Control, this Section 4 shall become operative immediately.
(b) Definition. For purposes of this Agreement, a "Change of
Control" means (i) 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, (ii) 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, (iii) any transaction or series of
transactions which results in any person or "group" becoming
the beneficial owner, directly or indirectly, of securities
representing more than fifty percent (50%) of the outstanding
voting securities of the Company, (iv) any time that, as a
result of a tender offer, merger, consolidation, sale of
assets or contested election, or any combination of such
transactions, the persons who were directors of the Company
immediately before such transaction(s) cease to constitute a
majority of the Board of Directors of the Company or of any
successor to the Company within one year of such transaction,
or (v) the voluntary or involuntary dissolution, liquidation
or winding up of the Company.
(c) Executive's Election Upon Change of Control. If, while
Executive is employed by the Company, a Change of Control (as
defined in subsection (b) of Section 4) occurs Executive may,
in his sole discretion, within one (1) year after the
effective date of the Change of Control, give notice to the
Company that he intends to elect to exercise his right to
terminate his employment and receive the payments provided for
<PAGE>
in Section 4(d) hereof (the "Notice of Intention"). The right
to give such Notice of Intention shall continue for one (1)
year from the date of the Change of Control irrespective of
any action by the Company pursuant to Section 7.2(c) within
such one (1) year period. In the event that Executive elects
not to exercise such rights, Executive's employment with the
Company shall continue on the terms and conditions provided in
this Agreement. In the event that Executive does elect to
exercise such rights, Executive's employment with the Company
shall terminate effective as of the date upon which the Notice
of Intention is received by the Company. Within ten (10)
business days after the Company's receipt of the Notice of
Intention, payment by the Company to Executive of the amounts
set forth in Section 4(d)(i) below shall be made by cashier's
check, accompanied by a written notice to Executive setting
forth the Company's computation of the amount payable pursuant
to Section 4(d). If Executive takes exception to the Company's
computation of such amount, Executive may (but shall not be
prejudiced in his right to later contest the amount actually
paid by failure to do so) give a further written notice to the
Company setting forth in reasonable detail Executive's
exceptions to the Company's computation. If the Company and
Executive are unable to resolve any dispute over the total
amount to be paid to Executive pursuant to Section 4(d)(i)
hereof in accordance with Section 13 hereof within thirty (30)
days after the date of the Notice of Intention, such dispute
shall be submitted for resolution to an independent third
party agreed upon between the Company and Executive (or if no
agreement can be reached, to a panel selected pursuant to the
rules of the American Arbitration Association) and any
additional amount that is determined to be owed by the Company
to Executive pursuant to Section 4(d)(i) hereof shall be paid
to Executive by cashier's check within ten (10) business days
after such dispute has been finally resolved.
(d) Compensation Upon Change of Control.
(i) If Executive gives the Notice of Exercise described
in Section 4(c), the Company shall pay Executive a
lump sum amount equal to three times Executive's base
amount (as defined by Section 280(G) of the Internal
Revenue Code of 1986, as amended (the "Code")) less
one dollar ($1.00). In addition to the foregoing, the
Company will continue to provide, for a period of
three years from the effective date of Executive's
termination, medical, life, dental and disability
insurance coverage to Executive of the type and
amount provided to Executive under the Company's
insurance policies as in effect at the time of
termination; provided, however, that if such coverage
does not continue to be maintained by the Company or
is otherwise not available to Executive, the Company
shall provide for or make available to Executive
substantially similar economic benefits; provided,
however, that nothing in this subsection (i) shall
obligate the Company to provide for or make any such
similar economic benefits available to Executive if
the Company does not have such benefits available to
its other executive officers. At the conclusion of
such two-year period, Executive shall be entitled to
any COBRA or similar rights required by state or
federal law. Notwithstanding anything in this
Agreement to the contrary, in the event that the
Company determines in good faith that any portion of
the payments or other benefits set forth in this
Section 4(d) constitutes an excess parachute payment
under Section 280(G) of the Code, then the Company
shall have no obligation to provide such portion to
Executive.
<PAGE>
(ii) Payment of the amount set forth in Section 4(d)(i)
shall terminate Executive's rights to receive any and
all other payments, rights or benefits pursuant to
Sections 3, 6 and 7 of this Agreement from the date
of termination, other than any payments, rights or
benefits arising (x) pursuant to Section 15.6 of this
Agreement, or (y) from any other agreement, plan or
policy which by its terms or by operation of law
provides for the continuation of such payments,
rights or benefits after the termination of
Executive's relationship with the Company.
(iii) The lump sum payment referred to in subsection (i)
above shall be in addition to and shall not be offset
or reduced by (x) any other amounts that have accrued
or have otherwise become payable to Executive or his
beneficiaries, but have not been paid by the Company,
at the time Executive gives a Notice of Intention
pursuant to Section 4(c) including, but not limited
to, salary, disability benefits, retirement benefits,
life and health insurance benefits, or any other
compensation or benefit payment that is part of any
valid previous, current, or future contract, plan or
agreement, or (y) any indemnification payments that
may be or become payable to Executive pursuant to the
provisions of the Company's Certificate of
Incorporation, By-laws, or similar policy, plan, or
agreement relating to the indemnification of
directors or officers of the Company under certain
circumstances.
5. Vesting of Stock Options Upon Change of Control. In the event of a
Change of Control, in addition to any benefits provided to Executive upon a
Change of Control pursuant to the relevant stock option plan or stock option
agreement governing any grant of stock options to Executive, and regardless of
whether Executive intends to give a Notice of Intention pursuant to Section 4(c)
hereof, any and all stock options granted to Executive pursuant to any of the
Company's stock option plans prior to the effective date of such Change of
Control that are unvested as of the effective date of such Change of Control
will become fully vested and exercisable beginning two business days prior to
the effective date of such Change of Control without regard to any vesting
schedules established in the relevant option plan or option agreement.
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 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, dental and disability plans,
if any. If 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 the greater of
(i) three (3) weeks paid vacation annually, or (ii)
such other amount of paid vacation as may be afforded
executive officers of similar position and seniority
to Executive under the Company's policies in effect
from time to time (prorated for any year in which
Executive is employed for less than the full year).
<PAGE>
(c) a housing allowance of up to $2,000 per month for a
period of eight (8) months from the Effective Date;
(d) reimbursement of actual and reasonable expenses
incurred by Executive in connection with travel from
the Company's headquarters in Albany, New York to
Executive's residence in Denver, Colorado up to a
maximum of two (2) trips per month for a period of
eight (8) months from the Effective Date;
(e) reimbursement of actual and reasonable expenses
incurred by Executive in relocating his principal
residence from Denver, Colorado to Albany, New York;
(f) if, after Executive relocates his principal residence
to Albany, New York and prior to one year from the
Effective Date, there is a Change of Control (as
defined in Section 4(b) hereof), reimbursement of
actual and reasonable expenses incurred by Executive
in relocating his principal residence back to Denver,
Colorado or some other location reasonably acceptable
to the Company; and
(g) the use of a Company automobile reasonably acceptable
to Executive selected from among the vehicles damaged
by the Company in the course of conducting its
transport operations that would otherwise have been
sold by the Company at auction.
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. Term; Termination; Rights Upon Termination.
7.1 Term. The Company hereby employs Executive and Executive hereby
accepts employment with the Company for a period beginning on the Effective Date
and ending on the third anniversary of the Effective Date (as extended pursuant
to the following provisions, the "Term"). As of the first day of any month
following the Effective Date, the Term shall be extended for an additional one
(1) month period unless either Executive or the Company gives the other party
written notice at least ten (10) days prior to the first day of such month that
this Agreement shall terminate on the then scheduled expiration date of the
Term. If such notice is given, this Agreement shall automatically terminate on
such expiration date. If this Agreement is extended, the terms in effect under
this Agreement immediately preceding such extension shall apply during the
extension period. If Executive's employment hereunder is terminated by either
the Company or Executive at any time for any reason, the expiration date shall
thereupon no longer be automatically extended.
7.2 Termination. This Agreement and Executive's employment may be
terminated in any one of the following ways:
(a) Death or Permanent Disability of Executive. Subject to the
payment to Executive of the amounts required by Section 7.3
below, this Agreement will terminate immediately upon the
death or permanent disability of Executive, whereupon
Executive shall have no further rights or be entitled to any
other benefits of this Agreement, other than the payments and
benefits referred to in Section 7.3 below. 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.
<PAGE>
(b) Executive's Discharge for Cause. At any time during the term
of this Agreement, subject to the payment to Executive of the
amounts required by Section 7.3(a) below, the Company may
terminate Executive's employment for "Cause" effective
immediately upon its giving of written notice setting forth
with particularity the facts and circumstances constituting
such Cause, whereupon this Agreement will terminate and
Executive shall have no further rights or be entitled to any
other benefits of this Agreement, other than the payments and
benefits referred to in Section 7.3(a) below. For purposes of
this Agreement, "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 but not
limited to fraud, embezzlement, theft, bad faith, gross
negligence, recklessness, dishonesty, gross 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 Executive by the Board of
Directors from time to time; (iii) conviction of a felony or
of any crime of moral turpitude; (iv) any material
misrepresentation by Executive to the Company regarding the
operation of the business; or (v) material breach of any
covenant of this Agreement, provided, however, that the action
or conduct described in clause (ii) or clause (v) above will
constitute "Cause" only if Executive shall have either failed
to remedy such alleged breach within thirty (30) days from his
receipt of written notice from the Company demanding that he
remedy such alleged breach, or shall have failed to take
reasonable steps in good faith to that end during such thirty
(30) day period and thereafter; and provided further that
there shall have been delivered to Executive a further notice
after the end of such thirty (30) day period asserting that
the Board of Directors has determined that Executive was
guilty of conduct set forth in clause (ii) or clause (v), as
the case may be, that Executive has failed to take reasonable
steps in good faith to remedy such alleged breach, and
specifying the particulars thereof in detail; and provided
further that Executive thereafter shall have received a
certified copy of a resolution of the Board of Directors of
the Company adopted by the affirmative vote of not less than
three-fourths of the entire membership of the Board of
Directors at a meeting called and held for that purpose and at
which Executive was given an opportunity to be heard, finding
that Executive was guilty of conduct set forth in clause (ii)
or clause (v), as the case may be, that Executive has failed
to take reasonable steps in good faith to remedy such alleged
breach, and specifying the particulars thereof in detail.
(c) The Company's Right to Terminate Without Cause. Subject to the
payment to Executive of the amounts required by Section 7.3
below, at any time during the term of this Agreement, the
Company may terminate Executive's employment with the Company
without "Cause" (as defined in Section 7.3 above), effective
immediately upon written notice to Executive, whereupon this
Agreement will terminate and Executive shall have no further
rights or be entitled to any other benefits of this Agreement,
other than the payments and benefits referred to in Section
7.3 below.
(d) Executive's Right to Terminate At Will. Executive shall have
the right at any time during the term of this Agreement, by
giving written notice to the Company, to terminate this
Agreement and Executive's employment with the Company
effective as of the date on which such notice is given by
Executive, unless the Company advises Executive that it
requires the services of Executive for an additional period of
time, not to exceed 30 days, in which case Executive's
employment shall cease as of the end of such period (such
effective date being hereinafter referred to as the "Executive
Termination Date"). On the Executive Termination Date, this
Agreement shall terminate and Executive shall have no further
rights under or be entitled to any other benefits of this
Agreement, other than the payments and benefits referred to in
Section 7.3(a) below.
7.3 Compensation and Benefits Upon Termination.
(a) Upon any termination of Executive's employment pursuant to
this Section 7, Executive will be entitled to: (i) the
compensation provided for in Section 3 hereof for the period
<PAGE>
of time ending with the effective 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 effective 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 effective date of termination.
(b) If (i) the Company terminates Executive's employment pursuant
to Section 7.2(c) above, or (ii) Executive terminates his
employment following the Company's assignment to Executive of
regular duties, responsibilities, or status which the Board of
Directors determines, in good faith, to be materially
inconsistent with Executive's duties, responsibilities, and
status under this Agreement or a reduction or alteration in
the nature or status of Executive's duties and
responsibilities from those in effect prior to such
assignment, then, in addition to the amounts payable in
Section 7.3(a) above:
(i) Executive will be entitled to receive a severance
payment in an amount equal to (i) two times the
amount of Executive's annual base salary in effect at
the time of termination, plus (ii) the aggregate
amount of the annual cash bonuses paid to Executive
in the two years immediately preceding such
termination (provided that if one of such years is
1999, the common stock portion of Executive's bonus
shall be considered a cash bonus for purposes of this
Section 7.3(b)(i)), which amount shall be paid to
Executive over a two-year period in equal
installments (pro rated for portions of a pay period)
on the Company's regular pay days, and the Company
will withhold all applicable federal and state
income, social security, disability and other taxes
as required by applicable law; provided, however,
that Executive's right to receive payments pursuant
to this Section 7.3(b)(i) shall cease immediately
upon a knowing violation by Executive of any of the
provisions of Sections 8, 9 or 10 hereof.
(ii) any and all stock options granted to Executive
pursuant to any of the Company's stock option plans
prior to the effective date of such termination that
are unvested as of the effective date of such
termination will continue to vest, and Executive
shall be permitted to exercise such options on the
terms set forth in the relevant option plan and
option agreement, in the same amounts and at the same
times as such options would have vested had Executive
remained employed by the Company until all such
options become fully vested (the period between the
effective date of termination and the date that all
such options become fully vested being hereafter
referred to as the "Option Vesting Period");
provided, however, that such continued vesting of
options shall immediately cease upon a knowing
violation by Executive during the Option Vesting
Period of any of the provisions of Sections 8, 9 or
10 hereof.
(iii) the Company will continue to provide, for a period of
two years from the effective date of Executive's
termination, medical, life, dental and disability
insurance coverage to Executive of the type and
amount provided to Executive under the Company's
insurance policies as in effect at the time of
termination; provided, however, that if such coverage
does not continue to be maintained by the Company or
is otherwise not available to Executive, the Company
shall provide for or make available to Executive
substantially similar economic benefits; provided,
however, that nothing in this subsection (iii) shall
obligate the Company to provide for or make any such
similar economic benefits available to Executive if
the Company does not have such benefits available to
its other Executive officers.
(iv) the Company will reimburse Executive for actual and
reasonable expenses incurred by Executive in
connection with outplacement services up to a maximum
of $30,000.
<PAGE>
(c) In the event of a termination upon the death or permanent
disability of Executive as provided in Section 7.2(a) above,
Executive or his estate shall be entitled to receive from the
Company, for a period of twelve months following the effective
date of termination, 100% of Executive's base salary at the
rate then in effect, payable in equal installments (pro rated
for portions of a pay period) on the Company's regular pay
days, and the Company will withhold all applicable federal and
state income, social security, disability and other taxes as
required by applicable law; provided, however, that in the
case of a termination upon the permanent disability of
Executive, such payments shall be reduced by all payments in
respect of Executive's salary payable to Executive under the
Company's disability insurance, if any, for the same period.
7.4 Effect of Termination. Subject to Section 4 hereof, the payments
set forth in Section 7.3 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, and all other rights and obligations of
the Company and Executive under this Agreement shall cease as of the effective
date of termination, except that Executive's obligations under Sections 8, 9,
and 10 shall survive such termination.
8. Unfair Competition by Executive.
8.1 Executive agrees that all trade secrets, or 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 During the term of this Agreement and for the greater of (i) the
period during which Executive is receiving compensation or benefits pursuant to
Section 7.3 hereof and (ii) a period of one year following the expiration or
termination of this Agreement for any reason, directly or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business whatever nature, Executive will not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, financier, manager, executive, independent
contractor, consultant, advisor, or sales representative, in
any business selling any products or services in direct
competition with the Company or any of its subsidiaries within
100 miles of any geographic location in which the Company or
any of its subsidiaries conducts business at such time (or in
the case of a termination or expiration of this Agreement,
within 100 miles of any geographic location in which the
Company or any of its subsidiaries conducted business at the
time of such expiration or termination) (the "Territory");
(b) call upon any prospective acquisition candidate 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) or for which
<PAGE>
the Company made an acquisition analysis, for the purpose of
acquiring such entity; provided, however, that Executive shall
not be charged with a violation of this Section 8.2(b) unless
and until Executive 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;
(c) call upon, contact or solicit 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);
(d) 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;
(e) 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.
(f) engage in any pattern of conduct that involves the making or
publishing of written or oral statements or remarks
(including, without limitation, the repetition or distribution
of derogatory rumors, allegations, negative reports or
comments) which are disparaging, deleterious or damaging to
the integrity, reputation or good will of the Company, its
management, or of management of corporations affiliated with
the Company.
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
Executive's employment by the Company that requires any substantial portion of
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 and Exchange Commission) or
other legally recognizable entity. Notwithstanding anything herein to the
contrary, the limitations in Sections 8.2 and 8.3 hereof will not prohibit any
investment by the Executive of not more than 3% of the outstanding capital stock
of a company whose securities are listed on a public exchange or the Nasdaq
Stock Market National Market.
8.4 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 8.1, 8.2, 8.3, 9 and 10 of this Agreement is
necessary, fundamental, and required for the protection of the Company's
business and goodwill; (ii) such covenants and restrictions relate to matters
which are of a special, unique, and extraordinary character that gives each of
them a special, unique, and extraordinary value which is difficult to measure in
economic terms; and (iii) a breach of any such covenant or restriction will
result in immediate and irreparable harm and damage to the Company which cannot
be compensated adequately by a monetary award or other remedy at law.
Accordingly, it is expressly agreed that, in addition to all other remedies
<PAGE>
available at law or in equity, and notwithstanding anything to the contrary in
Section 13 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, 8.2, 8.3, 9, and 10 of this Agreement.
8.5 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in Sections 8.1, 8.2 and 8.3 impose a reasonable restraint
on Executive 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
Executive 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 Agreement. It is further agreed by the
parties that a portion of the compensation paid to Executive under this
Agreement is paid in consideration of the covenants herein contained, the
sufficiency of which consideration is hereby acknowledged. If the scope of any
restriction contained in Sections 8.1, 8.2 or 8.3 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.
8.6 Independent Covenant. Each of the covenants in Sections 8, 9 and 10
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 Executive
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 time
periods stated at the beginning of Sections 8.2 and 9, during which the
agreements and covenants of Executive made in Sections 8.2 and 9 shall be
effective, shall be computed by excluding from such computation any time during
which Executive is in violation of any provision of Section 8 or 9. The
covenants contained in Sections 8, 9 and 10 shall not be affected by any breach
of any other provision of this Agreement by any party hereto.
9. Proprietary Matters. Executive expressly understands and agrees that
any and all improvements, inventions, discoveries, processes, or know-how that
are generated, conceived or made by Executive, solely or jointly with another,
during the term of this Agreement or within the greater of (i) the period during
which Executive is receiving compensation or benefits pursuant to Section 7.3
hereof, and (ii) one (1) year following termination or expiration of this
Agreement, and which are directly related to the business or activities of the
Company and which Executive conceives as a result of his employment by the
Company, whether so generated or conceived during Executive's regular working
hours or otherwise, and whether patentable or not, are the sole and exclusive
property of the Company, and Executive shall promptly disclose any such
improvements, inventions, discoveries, processes or know-how to the Company.
Executive hereby assigns and agrees to assign all his interests in such
improvements, inventions, discoveries, processes, and know-how to the Company or
its nominees and agrees, whenever requested to do so by the Company (either
during the term of this Agreement or thereafter), to 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 Letters of Patent, 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, or otherwise to protect the Company's interest therein.
10. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive 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
<PAGE>
business, activities or future plans of the Company which is collected by
Executive shall be delivered promptly to the Company without request by it upon
termination of Executive's employment.
11. No Prior Agreements. Executive hereby represents and warrants to
the Company that the execution of this Agreement by Executive and his employment
by the Company and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Executive 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 Executive and
such third party which was in existence as of the date of this Agreement.
12. 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.
13. 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. 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.
14. Indemnification. In the event Executive 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 Executive), by reason of the fact that he or she is or was performing
services within the course and scope of his or her employment with the Company
under this Agreement, then the Company shall protect, defend, indemnify and hold
harmless Executive against all expenses (including attorneys' fees, costs and
expenses), judgments, fines, costs, liabilities, damages, and amounts paid in
settlement, actually and reasonably incurred by Executive in connection
therewith. Without limiting the requirement above that Executive be performing
services within the course and scope of his or her employment, activities
constituting violations of law or written Company policy shall not constitute
services within the course and scope of Executive's employment, and the Company
shall not indemnify Executive for any such activities. Executive agrees to
immediately notify the Company of any threatened, pending or completed matter;
provided, however, that Executive'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. Executive agrees to accept any attorney reasonably
assigned by the Company to defend the Executive; provided that if counsel
selected by the Company shall have a conflict of interest that prevents such
counsel from representing Executive, Executive may engage separate counsel and
the Company shall pay all reasonable attorneys fees of such counsel.
15. Miscellaneous.
15.1 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.
15.2 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.
<PAGE>
15.3 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.
15.4 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.
15.5 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 15.4 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.
15.6 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.
15.7 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.
16. 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.
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. Gerald R. Riordan
17 Computer Drive West
Albany, NY 12205
By:_____________________________ ____________________________
Name: Richard A. Molyneux
Title: Chairman of the Board
EXHIBIT 10.2
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This Amended and Restated Executive Employment Agreement ("Agreement")
is made and entered into as of September 8, 1999 (the "Effective Date") by and
between United Road Services, Inc., a Delaware corporation (the "Company") and
Donald J. Marr, an individual resident of the State of New York ("Executive").
RECITALS
WHEREAS, the Company is engaged in the business of motor vehicle and
equipment towing, recovery and transport services (the "Business");
WHEREAS, the Company desires to employ Executive on a full-time basis
as Senior Vice President and 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; and
WHEREAS, Executive is employed hereunder by the Company in a
confidential relationship wherein Executive, in the course of his employment
with the Company, has and will continue to become familiar with and aware of
information as to the Company's customers, pricing, accounting, finances and
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 have 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.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, 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.
2. Duties. During the period of his employment with the Company
hereunder, Executive will be employed as Senior Vice President and 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
(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 $180,000 per annum during the Employment term. 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,
disability and other taxes as required by applicable laws. On at least an annual
basis, the Compensation Committee of the Board of Directors (the "Compensation
Committee") will review Executive's performance and may increase such base
salary if, in its discretion, any such increase is warranted. The Company may
<PAGE>
also pay Executive such bonuses and other incentive compensation, including
without limitation, stock options, as are determined from time to time to be
appropriate by the Board of Directors or a duly authorized committee thereof.
4. Change of Control.
(a) Operation of Section 4. This Section 4 shall be effective, but
not operative, immediately upon execution of this Agreement by
the parties hereto and shall remain in effect so long as
Executive remains employed by the Company, but shall not be
operative unless and until there has been a Change of Control,
as defined in subsection 4(b) hereof. Upon such Change of
Control, this Section 4 shall become operative immediately.
(b) Definition. For purposes of this Agreement, a "Change of
Control" means (i) 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, (ii) a merger or
consolidation or other reorganization in which the Company is
not the surviving entity or becomes owned entirely by another
entity, unless the outstanding voting securities of the
surviving or parent corporation, as the case may be,
immediately following such transaction are beneficially held
by the same persons and entities that beneficially held the
outstanding voting securities of the Company immediately prior
to such transaction in the same proportion as such persons or
entities held such voting securities immediately prior to the
transaction, (iii) any transaction or series of transactions
which results in any person or "group" becoming the beneficial
owner, directly or indirectly, of securities representing more
than fifty percent (50%) of the outstanding voting securities
of the Company, or (iv) during any period of twelve
consecutive months after the Effective Date the persons who
were directors of the Company at the beginning of such twelve
month period cease to constitute a majority of the Board of
Directors of the Company or of any successor to the Company.
(c) Executive's Election Upon Change of Control. If, while
Executive is employed by the Company, a Change of Control (as
defined in subsection (b) of Section 4) occurs and one or more
of the following events occurs:
(i) The assignment to Executive of duties,
responsibilities, or status inconsistent with his
duties, responsibilities, and status prior to the
Change of Control;
(ii) A reduction by the Company in Executive's base salary
or specified bonus (as in effect prior to the Change
of Control);
(iii) The failure to continue in effect the Company's
insurance, disability, stock option plans, or any
other Executive benefit plans, policies, practices or
arrangements in which Executive participates, or the
failure to continue Executive's participation therein
on substantially the same basis, both in terms of the
amount of benefits provided and the level of
Executive's participation relative to other
participants, as existed prior to the Change of
Control;
(iv) The failure of the Company to obtain a satisfactory
agreement from the successor to the Company to assume
and agree to perform this Agreement;
(v) Any termination by the Company of Executive's
employment other than pursuant to Section 6.2(c)
hereof; or
<PAGE>
(vi) The persons who were directors immediately before the
transaction that constitutes the Change of Control
cease to constitute a majority of the Board of
Directors of the Company after that transaction;
Executive may, in his sole discretion, prior to the Expiration Date, give notice
to the Company that he intends to elect to exercise his right to receive the
payments provided for in Section 4(d) hereof (the "Notice of Intention"). In the
event that Executive elects to exercise such right, Executive's employment with
the Company shall terminate effective as of the date upon which the Notice of
Intention is received by the Company. Within ten (10) business days after the
Company's receipt of the Notice of Intention, payment by the Company to
Executive of the amounts set forth in Section 4(d)(i) below shall be made by
cashier's check, accompanied by a written notice to Executive setting forth the
Company's computation of the amount payable pursuant to Section 4(d). If
Executive takes exception to the Company's computation of such amount, Executive
may (but shall not be prejudiced in his right to later contest the amount
actually paid by failure to do so) give a further written notice to the Company
setting forth in reasonable detail Executive's exceptions to the Company's
computation. If the Company and Executive are unable to resolve any dispute over
the total amount to be paid to Executive pursuant to Section 4(d)(i) hereof in
accordance with Section 12 hereof within thirty (30) days after the date of the
Notice of Intention, such dispute shall be submitted for resolution to an
independent third party agreed upon between the Company and Executive and any
additional amount that is determined to be owed by the Company to Executive
pursuant to Section 4(d)(i) hereof shall be paid to Executive by cashier's check
within ten (10) business days after such dispute has been finally resolved.
(d) Compensation Upon Change of Control.
(i) If Executive gives the Notice of Intention described
in Section 4(c), or if the Company terminates
Executive's employment other than pursuant to Section
6.2(c) hereof after a Change of Control but prior to
the Expiration Date, the Company shall pay Executive
a lump sum amount equal to three times Executive's
base amount (as defined by Section 280G of the
Internal Revenue Code of 1986, as amended (the
"Code")) less one dollar ($1.00). In addition to the
foregoing, the Company will continue to provide, for
a period of three years from the effective date of
Executive's termination, medical, life, dental and
disability insurance coverage to Executive of the
type and amount provided to Executive under the
Company's insurance policies as in effect at the time
of termination; provided, however, that if such
coverage does not continue to be maintained by the
Company or is otherwise not available to Executive,
the Company shall provide for or make available to
Executive substantially similar economic benefits;
provided, however, that nothing in this subsection
(i) shall obligate the Company to provide for or make
any such similar economic benefits available to
Executive if the Company does not have such benefits
available to its other executive officers.
Notwithstanding anything in this Agreement to the
contrary, in the event that the Company determines in
good faith that any portion of the payments or other
benefits set forth in this Agreement or any other
plan, arrangement or otherwise constitutes an excess
parachute payment under Section 280G of the Code,
then the Company shall have no obligation to provide
such portion to Executive.
<PAGE>
(ii) Payment of the amount set forth in Section 4(d)(i)
shall terminate Executive's rights to receive any and
all other payments, rights or benefits pursuant to
Sections 3, 5 and 6 of this Agreement from the date
of termination, other than any payments, rights or
benefits arising (x) pursuant to Section 14.6 of this
Agreement, or (y) from any other agreement, plan or
policy which by its terms or by operation of law
provides for the continuation of such payments,
rights or benefits after the termination of
Executive's relationship with the Company.
(iii) The lump sum payment referred to in subsection (i)
above shall be in addition to and shall not be offset
or reduced by (x) any other amounts that have accrued
or have otherwise become payable to Executive or his
beneficiaries, but have not been paid by the Company
as of the effective date of termination of
Executive's employment with the Company, including,
but not limited to, salary, consulting fees,
disability benefits, retirement benefits, life and
health insurance benefits, or any other compensation
or benefit payment that is part of any valid
previous, current, or future contract, plan or
agreement, written or oral, or (y) any
indemnification payments that may be or become
payable to Executive pursuant to the provisions of
the Company's Certificate of Incorporation, By-laws,
or similar policy, plan, or agreement relating to the
indemnification of directors or officers of the
Company under certain circumstances.
(e) Vesting of Stock Options Upon Change of Control. In the event
of a Change of Control, in addition to any benefits provided
to Executive upon a Change of Control pursuant to the relevant
stock option plan or stock option agreement governing any
grant of stock options to Executive, and regardless of whether
Executive intends to give a Notice of Intention pursuant to
Section 4(c) hereof or Executive's employment with the Company
terminates after a Change of Control), any and all stock
options granted to Executive pursuant to any of the Company's
stock option plans prior to the effective date of such Change
of Control that are unvested as of the effective date of such
Change of Control will become fully vested and exercisable
beginning two business days prior to the effective date of
such Change of Control without regard to any vesting schedules
established in the relevant option plan or option agreement.
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, dental and disability plans,
if any. If 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 (3)
weeks paid vacation annually; provided that any
vacation may be taken by Executive at any time
Executive deems appropriate, upon consultation with
the Chief Executive Officer, who may determine that
the best interests of the Company require otherwise.
<PAGE>
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. Term; Termination; Rights Upon Termination.
6.1 Term. Subject to Section 6.2 below, the Company hereby employs
Executive and Executive hereby accepts employment with the Company for a period
(the "Term") beginning on the Effective Date and ending on the earlier of (a)
February 2, 2001 and (b) the first anniversary of the effective date of the
employment agreement to be entered into between the Company and the new chief
executive officer hired to replace Edward T. Sheehan (such earlier date being
referred to herein as the "Expiration Date").
6.2 Termination. This Agreement and Executive's employment may be
terminated in any one of the following ways:
(a) Expiration of Term of Agreement. This Agreement will terminate
automatically without notice upon the Expiration Date.
(b) Death or Permanent Disability of Executive. Subject to the
payment to Executive of the amounts required by Section 6.3
below, this Agreement will terminate immediately upon the
death or permanent disability of Executive, whereupon
Executive shall have no further rights or be entitled to any
other benefits of this Agreement, other than the payments and
benefits referred to in Section 6.3 below. 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.
(c) Executive's Discharge for Cause. The Company may terminate
Executive's employment hereunder for "Cause" at any time
effective immediately upon its giving of written notice
setting forth with particularity the facts and circumstances
constituting such Cause, whereupon this Agreement will
terminate and Executive shall have no further rights or be
entitled to any other benefits of this Agreement, other than
the payments and benefits referred to in Section 6.3(a) below.
For purposes of this Agreement, "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 but not limited to fraud, embezzlement, theft, bad
faith, gross negligence, recklessness, dishonesty,
insubordination 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; (iv) any material misrepresentation by Executive to
the Company regarding the operation of the business; or (v)
material breach of any covenant of this Agreement, provided,
that the action or conduct described in clause (ii) or clause
(v) above will constitute "Cause" only if such action or
conduct continues after the Company has provided Executive
with written notice and a reasonable opportunity (to be not
less than 30 days) to cure the same.
(d) The Company's Right to Terminate At Will. Subject to the
payment to Executive of the amounts required by Section 6.3(a)
below, the Company may, at any time during the term of this
<PAGE>
Agreement, terminate Executive's employment with the Company
without "Cause" (as defined in Section 6.2(c) above),
effective immediately upon written notice to Executive,
whereupon this Agreement will terminate and Executive shall
have no further rights or be entitled to any other benefits of
this Agreement, other than the payments and benefits referred
to in Section 6.3(a) below.
(e) Executive's Right to Terminate At Will. Executive shall have
the right at any time during the term of this Agreement, by
giving written notice to the Company, to terminate this
Agreement and Executive's employment with the Company
effective as of the date on which such notice is given by
Executive, unless the Company advises Executive that it
requires the services of Executive for an additional period of
time, not to exceed 30 days, in which case, Executive's
employment shall cease as of the end of such period (such
effective date being hereinafter referred to as the "Executive
Termination Date"). On the Executive Termination Date, this
Agreement shall terminate and Executive shall have no further
rights under or be entitled to any other benefits of this
Agreement, other than the payments and benefits referred to in
Section 6.3(a) below.
6.3 Compensation and Benefits Upon Termination.
(a) Upon any termination of Executive's employment pursuant to
this Section 6, Executive will be entitled to: (i) the
compensation provided for in Section 3 hereof for the period
of time ending with the effective 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 effective 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 5.2 above prior
to the effective date of termination.
(b) If during the term of this Agreement (i) the Company
terminates Executive's employment pursuant to Section 6.2(c)
above, (ii) Executive terminates his employment following the
Company's assignment to Executive of regular duties,
responsibilities or status which the Board of Directors
determines, in good faith, to be materially inconsistent with
Executive's duties, responsibilities and status in effect
prior to such assignment, or (iii) Executive terminates his
employment within one (1) month following a relocation of the
Company's headquarters to a location more than 45 miles from
its current location, then, in addition to the amounts payable
in Section 6.3(a) above, Executive will be entitled to receive
a severance payment in an amount equal to Executive's annual
base salary in effect at the time of termination, plus the
amount of Executive's annual cash bonus for the year
immediately preceding such termination, which amount shall be
paid to Executive over a one-year period in equal installments
(pro rated for portions of a pay period) on the Company's
regular pay days, and the Company will withhold all applicable
federal and state income, social security, disability and
other taxes as required by applicable law; provided, however,
that Executive's right to receive payments pursuant to this
Section 6.3(b)(i) shall cease immediately upon a knowing
violation by Executive of any of the provisions of Sections 7,
8 or 9 hereof.
(ii) any and all stock options granted to Executive
pursuant to any of the Company's stock option plans
prior to the effective date of such termination that
are unvested as of the effective date of such
termination will continue to vest, and Executive
shall be permitted to exercise such options on the
terms set forth in the relevant option plan and
option agreement, in the same amounts and at the same
times as such options would have vested had Executive
remained employed by the Company until all such
options become fully vested (the period between the
effective date of termination and the date that all
such options become fully vested being hereafter
referred to as the "Option Vesting Period");
<PAGE>
provided, however, that such continued vesting of
options shall immediately cease upon a knowing
violation by Executive during the Option Vesting
Period of any of the provisions of Sections 7, 8 or 9
hereof.
(iii) the Company will continue to provide, for a period of
two years from the effective date of Executive's
termination, medical, life, dental and disability
insurance coverage to Executive of the type and
amount provided to Executive under the Company's
insurance policies as in effect at the time of
termination; provided, however, that if such coverage
does not continue to be maintained by the Company or
is otherwise not available to Executive, the Company
shall provide for or make available to Executive
substantially similar economic benefits; provided,
however, that nothing in this subsection (iii) shall
obligate the Company to provide for or make any such
similar economic benefits available to Executive if
the Company does not have such benefits available to
its other Executive officers.
(c) In the event of a termination upon the death or permanent
disability of Executive as provided in Section 6.2(b) above,
Executive or his estate shall be entitled to receive from the
Company, for a period of twelve months following the effective
date of termination, 100% of Executive's annual base salary at
the rate then in effect, payable in equal installments (pro
rated for portions of a pay period) on the Company's regular
pay days, and the Company will withhold all applicable federal
and state income, social security, disability and other taxes
as required by applicable law; provided, however, that in the
case of a termination upon the permanent disability of
Executive, such payments shall be reduced by all payments in
respect of Executive's salary payable to Executive under the
Company's disability insurance, if any, for the same period.
6.4 Effect of Termination. Subject to Section 4 hereof, the payments
set forth in Section 6.3 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, and all other rights and obligations of
the Company and Executive under this Agreement shall cease as of the effective
date of termination, except that Executive's obligations under Sections 7, 8,
and 9 shall survive such termination.
7. Unfair Competition by Executive.
7.1 Executive agrees that all trade secrets, or 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 the greater of (i) the
period during which Executive is receiving compensation or benefits pursuant to
Section 6.3 hereof and (ii) a period of one year following the expiration or
termination of this Agreement for any reason, Executive will not, directly or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
<PAGE>
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, financier, manager, executive, employee,
independent contractor, consultant, advisor, or sales
representative, in any business selling any products or
services in direct competition with the Company or any of its
subsidiaries within 100 miles of any geographic location in
which the Company or any of its subsidiaries conducts business
at such time (or in the case of a termination or expiration of
this Agreement, within 100 miles of any geographic location in
which the Company or any of its subsidiaries conducted
business at the time of such expiration or termination) (the
"Territory");
(b) call upon any prospective acquisition candidate 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) or for which
the Company made an acquisition analysis, for the purpose of
acquiring such entity; provided, however, that Executive shall
not be charged with a violation of this Section 7.2(b) unless
and until Executive 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;
(c) call upon, contact or solicit 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 Executive
shall be permitted to call upon and hire any member of his or
her immediate family;
(d) 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;
(e) 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.
(f) engage in any pattern of conduct that involves the making or
publishing of written or oral statements or remarks
(including, without limitation, the repetition or distribution
of derogatory rumors, allegations, negative reports or
comments) which are disparaging, deleterious or damaging to
the integrity, reputation or good will of the Company, its
management, or of management of corporations affiliated with
the Company.
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
Executive's employment by the Company that requires any substantial portion of
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,
<PAGE>
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 and Exchange Commission) or
other legally recognizable entity. Notwithstanding anything herein to the
contrary, the limitations in Sections 7.2 and 7.3 hereof will not prohibit any
investment by the Executive of not more than 3% of the outstanding capital stock
of a company whose securities are listed on a public exchange or the National
Association of Securities Dealers Automated Quotation National Market System.
7.4 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 7.1, 7.2, 7.3, 8 and 9 of this Agreement is
necessary, fundamental, and required for the protection of the Company's
business and goodwill; (ii) such covenants and restrictions relate to matters
which are of a special, unique, and extraordinary character that gives each of
them a special, unique, and extraordinary value which is difficult to measure in
economic terms; and (iii) a breach of any such covenant or restriction will
result in immediate and irreparable harm and damage to the Company which cannot
be compensated adequately by a monetary award or other remedy at law.
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 12 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, 7.3, 8, and 9 of this Agreement.
7.5 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in Sections 7.1, 7.2 and 7.3 impose a reasonable restraint
on Executive 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
Executive 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 Agreement. It is further agreed by the
parties that a portion of the compensation paid to Executive under this
Agreement is paid in consideration of the covenants herein contained, the
sufficiency of which consideration is hereby acknowledged. If the scope of any
restriction contained in Sections 7.1, 7.2 or 7.3 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.
7.6 Independent Covenant. Each of the covenants in Sections 7, 8 and 9
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 Executive
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 time
periods stated at the beginning of Sections 7.2 and 8, during which the
agreements and covenants of Executive made in Sections 7.2 and 8 shall be
effective, shall be computed by excluding from such computation any time during
which Executive is in violation of any provision of Section 7 or 8. The
covenants contained in Sections 7, 8 and 9 shall not be affected by any breach
of any other provision of this Agreement by any party hereto.
8. Proprietary Matters. Executive expressly understands and agrees that
any and all improvements, inventions, discoveries, processes, or know-how that
are generated, conceived or made by Executive, solely or jointly with another,
during the term of this Agreement or within the greater of (i) the period during
which Executive is receiving compensation or benefits pursuant to Section 8.3
hereof, and (ii) one (1) year following termination or expiration of this
Agreement, and which are directly related to the business or activities of the
Company and which Executive conceives as a result of his employment by the
Company, whether so generated or conceived during Executive's regular working
hours or otherwise, and whether patentable or not, are the sole and exclusive
<PAGE>
property of the Company, and Executive shall promptly disclose any such
improvements, inventions, discoveries, processes or know-how to the Company.
Executive hereby assigns and agrees to assign all his interests in such
improvements, inventions, discoveries, processes, and know-how to the Company or
its nominees and agrees, whenever requested to do so by the Company (either
during the term of this Agreement or thereafter), to 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 Letters of Patent, 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, or otherwise to protect the Company's interest therein.
9. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive 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
Executive shall be delivered promptly to the Company without request by it upon
termination of Executive's employment.
10. No Prior Agreements. Executive hereby represents and warrants to
the Company that the execution of this Agreement by Executive and his employment
by the Company and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Executive 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 Executive and
such third party which was in existence as of the date of this Agreement.
11. 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.
12. 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. 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.
13. Indemnification. In the event Executive 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 Executive), by reason of the fact that he is or was performing services
within the course and scope of his employment with the Company under this
Agreement, then the Company shall protect, defend, indemnify and hold harmless
Executive against all expenses (including attorneys' fees, costs and expenses),
judgments, fines, costs, liabilities, damages, and amounts paid in settlement,
actually and reasonably incurred by Executive in connection therewith. Without
limiting the requirement above that Executive be performing services within the
course and scope of his employment, activities constituting violations of law or
Company policy shall not constitute services within the course and scope of
Executive's employment, and the Company shall not indemnify Executive for any
such activities. Executive agrees to immediately notify the Company of any
threatened, pending or completed matter; provided, however, that Executive'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.
Executive agrees to accept any attorney reasonably assigned by the Company to
defend the Executive; provided that if counsel selected by the Company shall
<PAGE>
have a conflict of interest that prevents such counsel from representing
Executive, Executive may engage separate counsel and the Company shall pay all
reasonable attorneys fees of such counsel.
14. Miscellaneous.
14.1 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.
14.2 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.
14.3 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.
14.4 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.
14.5 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,
including without limitation the Executive Employment Agreement between the
parties dated as of February 2, 1998 and the Amended and Restated Executive
Employment Agreement between the parties dated as of May 1, 1998. Except as
provided in Section 14.4 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.
14.6 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.
14.7 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.
15. 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.
<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 J. Marr
By: /s/ Richard A. Molyneux /s/ Donald J. Marr
------------------------------- -----------------------------
Richard A. Molyneux
Authorized Board Representative
17 Computer Drive West
Albany, New York 12205
EXHIBIT 10.3
September 24, 1999
United Road Services, Inc.
17 Computer Drive West
Albany, New York 12205
Ladies/Gentlemen:
Please refer to the Second Amended and Restated Credit Agreement dated
as of June 11, 1999 (the "Credit Agreement") among United Road Services, Inc.
(the "Company"), various financial institutions and Bank of America National
Trust and Savings Association, as Administrative Agent. Capitalized terms used
but not otherwise defined herein have the meanings assigned thereto in the
Credit Agreement.
The Company, the Banks and the Agent hereby agree that the Credit
Agreement is terminated effective as of July 9, 1999 as if the Credit Agreement
had not been executed and delivered by the parties thereto. Without limiting the
foregoing, (a) the Company releases each Bank from any Commitment under the
Credit Agreement and agrees that no Bank shall have any obligation or liability
to the Company under or in connection with the Credit Agreement and (b) each
Bank hereby releases the Company from any obligation to pay any fees in
connection with the Credit Agreement and agrees that the Company shall have no
obligation or liability to such Bank under or in connection with the Credit
Agreement.
This letter agreement shall become effective upon receipt by the Agent
of counterparts hereof (or facsimiles thereof) executed by the Company and all
Banks. This letter agreement may be executed in counterparts and by the parties
hereto on separate counterparts. This letter agreement shall be governed by the
laws of the State of Illinois applicable to contracts made and to be performed
entirely within such State.
<PAGE>
BANK OF AMERICA, N.A., as Agent
-------------------------------
By:
- ------------------------------------------
Title:
BANK OF AMERICA, N.A., as Issuing Bank,
Swing Line Bank and a Bank
By:
Title:
BANKBOSTON, N.A., as Syndication Agent
and a Bank
By:
Title:
CIBC INC., as Documentation Agent and
a Bank
By:
Title:
HELLER FINANCIAL, INC., as a Bank
By:
Title:
<PAGE>
KZH CYPRESSTREE-1 LLC, as a Bank
By:
Title:
MICHIGAN NATIONAL BANK, as a Bank
By:
Title:
NORTH AMERICAN SENIOR FLOATING RATE FUND,
as a Bank
By: CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC., as
Portfolio Manager
By:
Title:
SRF TRADING, INC., as a Bank
By:
Title:
THE CHASE MANHATTAN BANK, as a Bank
By:
Title:
COMERICA BANK, as a Bank
By:
Title:
<PAGE>
CYPRESSTREE INSTITUTIONAL FUND, LLC,
as a Bank
BY: CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC., its
Managing Member
By:
Title:
HAMILTON BANK, N.A., as a Bank
By:
Title:
By:
Title:
<PAGE>
UNION BANK OF CALIFORNIA, N.A., as a Bank
By:
Title:
MAGNETITE ASSET INVESTORS, LLC, as a Bank
By:
Title:
Accepted and Agreed as of
the date first written above:
UNITED ROAD SERVICES, INC.
By:
Title:
EXHIBIT 10.4
SECOND AMENDMENT
THIS SECOND AMENDMENT (this "Amendment") dated as of November 12, 1999
is among UNITED ROAD SERVICES, INC. (the "Company"), various financial
institutions and BANK OF AMERICA, N.A. (f/k/a Bank of America National Trust and
Savings Association), as agent (in such capacity, the "Agent").
W I T N E S E T H:
WHEREAS, the Company, various financial institutions and the Agent are
parties to an Amended and Restated Credit Agreement dated as of November 2, 1998
(the "Credit Agreement" and, as amended and modified by this Amendment, the
"Amended Credit Agreement");
WHEREAS, the parties hereto desire to amend the Credit Agreement as
hereinafter provided; and
WHEREAS, the Company desires to reduce the Commitment Amount under and
as defined in the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1 Defined Terms. Terms used in this Amendment which are defined in the
Credit Agreement shall have the respective meanings assigned to such terms in
the Credit Agreement unless otherwise defined herein.
SECTION 2 Amendments to Credit Agreement. The Credit Agreement is amended as set
forth below in this Section 2
2.1 Amendment to Definition of Base Rate Margin. The definition of Base
Rate Margin is amended in its entirety to read as follows:
"Base Rate Margin means a rate per annum determined
in accordance with Schedule 1.1A, provided that, upon the
request of the Required Banks, the Base Rate Margin shall be
equal to 1% beginning on the date of effectiveness of the
Second Amendment to this Agreement and continuing through
February 29, 2000 (or such earlier date as the Required Banks
may agree)."
2.2 Addition of Reporting Requirement. Section 10 shall be amended by
adding the following subsection 10.1.12 and renumbering the existing subsection
10.1.12 as 10.1.13:
"10.1.12 Monthly EBITDA Report. The Company shall
furnish to the Agent promptly when available and in any event
within 30 days after the end of each month a calculation in
reasonable detail of EBITDA for such month."
2.3 Addition of Financial Covenant. Subsection 10.6 is amended by
inserting the following subsection 10.6.7 at the end thereof:
"10.6.7 Minimum EBITDA. Not permit EBITDA for any
period set forth below plus (i) bonuses paid to Gerald R.
Riordan in an aggregate amount not exceeding $100,000, (ii)
the charge-off of certain deferred financing costs in an
aggregate amount not exceeding $320,000 and (iii) payments to
Kibel Green for consulting services, not exceeding $200,000
per month, in each case to the extent deducted in determining
EBITDA for such period, to be less than the applicable amount
set forth below for such period:
<PAGE>
Period Minimum EBITDA
------ --------------
10/1/99 - 10/31/99 $1,700,000
10/1/99 - 11/30/99 3,400,000
10/1/99 - 12/31/99 5,100,000
10/1/99 - 1/31/00 7,000,000."
2.4 Amendment of Mergers, Consolidations, Sales Covenant. Clause
(c)(3)(i)(y) of subsection 10.10 is amended in its entirety to read as follows:
"(y) no cash consideration is to be paid by the
Company and its Subsidiaries in connection therewith"
2.5 Amendment to Advances and Other Investments Covenant. Clause (i) of
subsection 10.20 is amended by deleting the amount $2,500,000 therein and
replacing $1,500,000 therefor.
2.6 Addition of Covenant. Section 10 is amended by inserting the
following subsection 10.25 at the end thereof:
"10.25 Operating Leases. Not and not permit any
Subsidiary to, incur or assume any liability for rental
payments under any lease (including any lease resulting from a
sale and leaseback transaction, but excluding any Capital
Lease) if, after giving effect thereto, the aggregate amount
of all payments under such leases in Fiscal Year 1999 would
exceed $8,600,000."
2.7 Amendment to Change in Control. Clause (d) of subsection 12.1.11 is
amended by deleting the word "all" and replacing it with "any two".
2.8 Amendment to Schedule of Key Executive Officers. Schedule 12.1.11A
to the Credit Agreement is amended to read in its entirety as set forth in
Schedule 12.1.11A to this Agreement.
2.9 Amendment to Schedule of Key Directors. Schedule 12.1.11B to the
Credit Agreement is amended to read in its entirety as set forth in Schedule
12.1.11B to this Agreement.
SECTION 3. Waiver; Limitation on Outstandings. Effective as of
September 30, 1999 (but subject to the occurrence of the Amendment Effective
Date), the Required Banks hereby waive through February 29, 2000 the Company's
non-compliance with Sections 10.6.1 and 10.6.5 of the Credit Agreement so long
as the Consolidated Net Income for the Fiscal Quarter ending September 30, 1999
is not less than ($3,687,000). In consideration of such waiver, the Company (a)
acknowledges that upon the expiration of such waiver (unless a new waiver or an
amendment has been agreed to by the Required Banks) an immediate Event of
Default shall exist under the Credit Agreement; and (b) agrees that, unless the
Required Banks otherwise consent the aggregate outstanding principal amount of
all Loans plus the Stated Amount of all Letters of Credit shall not at any time
exceed from the date hereof through December 31, 1999 $58,000,000 and
$55,000,000 after January 1, 2000.
SECTION 4. Conditions Precedent. This Amendment shall become effective
as of the date hereof on the date (the "Amendment Effective Date") on which all
of the following conditions shall have been satisfied:
4.1 Receipt of Documents. The Agent shall have received all of the
following, each duly executed and dated a date acceptable to, and otherwise in
form and substance satisfactory to, the Agent, and in sufficient number of
signed counterparts to provide one for each Bank:
<PAGE>
(a) Amendment. Counterpart originals of this Amendment
executed by the Company, the Required Banks and the Agent. For purposes
of this clause (a), a facsimile executed copy shall be treated as an
original.
(b) Certificates A certificate of the secretary or an
assistant secretary of the Company, substantially in the form of
Exhibit A to this Amendment, and a certificate of the President, the
Chief Financial Officer or the Vice President, Finance of the Company,
substantially in the form of Exhibit B to this Amendment.
(c) Opinion. An opinion of counsel to the Company in form and
substance satisfactory to the Agent.
(d) Confirmation. A Confirmation substantially in the form of
Exhibit C to this Amendment.
(e) Other. Such other documents as the Agent or any Bank may
reasonably request.
4.2 No Default. No Event of Default or Unmatured Event of Default shall
have occurred and be continuing (other than any such event which is waived
hereby).
4.3 Amendment Fee. For the account of each Bank which has executed and
delivered a counterpart hereof to the Agent by noon (Chicago time) on November
15, 1999, an amendment fee equal to 0.10% of the Commitment of such Bank after
giving effect to the reduction of the Commitment Amount set forth in Section
5.10 (it being understood that the Agent shall distribute such fee to each Bank
promptly upon receipt thereof).
SECTION 5 Miscellaneous.
5.1 Pricing. The Required Banks request that the Base Rate Margin be 1%
as of the Amendment Effective Date through February 29, 2000.
5.2 Warranties. In order to induce the Banks to enter into this
Amendment, the Company hereby warrants to the Agent and each Bank that, as of
the date of the execution of this Amendment by the Company, the warranties of
the Company contained in the Credit Agreement are true and correct as if made on
such date.
5.3 Appointment of Key Director and Key Executive. The Required Banks
hereby acknowledge and, for purposes of Section 12.1.11 of the Credit Agreement,
approve the appointment of Gerald R. Riordan to the Board of Directors of the
Company and as Chief Executive Officer to the Company.
5.4 Expenses. The Company agrees to pay on demand all costs and
expenses of the Agent (including fees, charges and expenses of counsel for the
Agent) in connection with the preparation, negotiation, execution, delivery and
administration of this Amendment and all other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith.
5.5 Captions. Section captions used in this Amendment are for
convenience only and shall not affect the construction of this Amendment.
5.6 Governing Law. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
5.7 Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
<PAGE>
5.8 Continuing Effectiveness. Except as herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified in all
respects.
5.9 Successors and Assigns. This Amendment shall be binding upon the
parties hereto and their respective successors and assigns, and shall inure to
the sole benefit of the parties hereto and the successors and assigns of the
Agent and the Banks.
5.10 Waiver of Notice of Commitment Reduction. The Company has
requested a permanent reduction in the Commitment Amount to $65,000,000 pursuant
to Section 6.1.1 of the Credit Agreement. The Required Banks hereby waive the
five day notice requirement set forth in such Section 6.1.1, and the Company and
the Required Banks agree that such reduction shall become effective immediately
upon the effectiveness of this Amendment.
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above
written.
UNITED ROAD SERVICES, INC.
By:
Its:
BANK OF AMERICA, N.A., as Agent
By:
Its:
BANK OF AMERICA, N.A., as Issuing
Bank, Swing Line Bank and as a
Bank
By:
Its:
BANKBOSTON, N.A.
By:
Its:
COMERICA BANK
By:
Its:
FLEET NATIONAL BANK
By:
Its:
THE CHASE MANHATTAN BANK
By:
Its:
<PAGE>
SCHEDULE 12.1.11A
KEY EXECUTIVES
Name Current Office(s)
- ---- -----------------
Richard A. Molyneux Chairman of the Board
Gerald R. Riordan Chief Executive Officer
<PAGE>
SCHEDULE 12.1.11B
KEY DIRECTORS
Richard A. Molyneux
Gerald R. Riordan
Edward W. Morawski
Mark J. Henninger
Todd Q. Smart
<PAGE>
EXHIBIT A
---------
United Road Services, Inc.
[Assistant] Secretary's Certificate
-----------------------------------
To: The Banks and the Agent
parties to the Amendment
referenced below
This Certificate is being furnished pursuant to Section 3.1 of the
First Amendment (the "Amendment") dated as of November __, 1999 among United
Road Services, Inc. (the "Company"), various financial institutions and Bank of
America National Trust and Savings Association, as agent (in such capacity, the
"Agent"), which amends the Amended and Restated Credit Agreement dated as of
November 2, 1998 among the Company, various financial institutions and the
Agent. Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Amendment.
The undersigned, ____________________, [Assistant] Secretary of the
Company, hereby certifies on behalf of the Company that attached hereto as
Attachment 1 are true and correct copies of certain resolutions which were duly
adopted by the Board of Directors of the Company as of __________, 1999; such
resolutions have not been rescinded or amended and are in full force and effect
on and as of the date hereof and, except for such resolutions, there is no other
corporate action, consent or governmental or regulatory approval required for
the execution and delivery of the Amendment.
IN WITNESS WHEREOF, I have executed this Certificate on this ____ day
of November, 1999.
UNITED ROAD SERVICES, INC.
By:
Name:
Title: [Assistant] Secretary
<PAGE>
ATTACHMENT 1
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF UNITED ROAD SERVICES, INC.
WHEREAS, there has been presented to this Board of Directors a form of
First Amendment (the "Amendment") among UNITED ROAD SERVICES, INC. (this
"Corporation"), various financial institutions and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as agent (in such capacity, the "Agent"),
providing for the amendment of the Amended and Restated Credit Agreement dated
as of November 2, 1998 among the Corporation, various financial institutions and
the Agent (the "Credit Agreement"); capitalized terms used but not defined
herein shall have the respective meanings assigned thereto in the Amendment;
WHEREAS, it is contemplated that certain officers of this Corporation
shall be required to execute the Amendment and various other agreements,
instruments or documents contemplated by the Amendment or requested by the Agent
or any Bank;
NOW, THEREFORE, BE IT RESOLVED, that the Chairman of the Board, the
President, the Chief Financial Officer and any Vice President of this
Corporation be, and each of them acting alone is, hereby authorized to execute
and deliver, in the name and on behalf of this Corporation, (i) the Amendment,
substantially in the form presented to this Board of Directors, and (ii) any and
all other agreements, instruments or documents contemplated by the Amendment or
requested by the Agent or any Bank; this authorization to execute and deliver
the foregoing encompasses the authorization to make such changes, additions and
deletions as to any or all of the terms and provisions of any or all of the
foregoing agreements, instruments and documents as the officer executing the
same shall approve (hereinafter, as so executed and delivered and as any or all
of the foregoing agreements, instruments and documents may at any time be
amended or otherwise modified, sometimes called the "Agreements"); and the
execution and delivery of each of the Agreements by such officer shall be
conclusive evidence of the approval thereof on behalf of this Corporation by
such officer and by this Board of Directors;
FURTHER RESOLVED, that the Chairman of the Board, the President, the
Chief Financial Officer and any Vice President of this Corporation be, and each
of them acting alone is, hereby authorized to cause this Corporation to borrow
funds under the Credit Agreement as amended by the Amendment;
<PAGE>
FURTHER RESOLVED, that each and every officer of this Corporation be,
and each of them acting alone is, hereby authorized, from time to time, in the
name and on behalf of this Corporation, to take such actions and to execute and
deliver such certificates, instruments, notices and documents as may be required
or as such officer may deem necessary, advisable or proper in order to carry out
and perform the obligations of this Corporation under the Credit Agreement, as
amended by the Amendment, or any other instrument, document or agreement
executed pursuant to any of the foregoing; all such certificates, instruments,
notices, documents and agreements to be executed and delivered in such form as
the officer performing or executing the same may approve, and the performance or
execution thereof by such officer shall be conclusive evidence of the approval
thereof by such officer and by this Board of Directors;
FURTHER RESOLVED, that the Secretary and/or Assistant Secretary of this
Corporation is hereby directed to file the drafts of each of the Agreements
which have been presented to the members of the Board of Directors with the
official records of this Corporation; and
FURTHER RESOLVED, that the Chairman of the Board, the President, the
Chief Financial Officer, any Vice President, the Secretary or any Assistant
Secretary of this Corporation be, and each of them acting alone is, hereby
authorized to certify and deliver to the Agent or other persons a true copy of
the foregoing resolutions.
<PAGE>
EXHIBIT B
---------
UNITED ROAD SERVICES, INC.
Officer's Certificate
---------------------
To: The Banks and the Agent
parties to the Amendment
referenced below
This Certificate is being furnished pursuant to Section 3.1 of the
Second Amendment (the "Amendment") dated as of November __, 1999 among United
Road Services, Inc. (the "Company"), various financial institutions and Bank of
America National Trust and Savings Association, as agent (in such capacity, the
"Agent"), which amends the Amended and Restated Credit Agreement dated as of
November 2, 1998 among the Company, various financial institutions and the
Agent. Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement as amended by the Amendment.
The undersigned, _______________, _________________ of the Company,
hereby certifies on behalf of the Company that:
1. The representations and warranties on the part of the Company
contained in the Credit Agreement as amended by the Amendment are true and
correct at and as of the date hereof as though made on and as of the date
hereof.
2. As of the date hereof, no Event of Default or Unmatured Event of
Default exists.
IN WITNESS WHEREOF, I have executed this Certificate on this ____ day
of November, 1999.
UNITED ROAD SERVICES, INC.
By: _________________________________
Name:
Title:
<PAGE>
EXHIBIT C
CONFIRMATION
Dated as of November 12, 1999
To: Bank of America National Trust
and Savings Association, as
Agent, and the Banks which are
parties to the Amended and Restated
Credit Agreement referred to below
Please refer to (a) the Amended and Restated Credit Agreement dated as
of November 2, 1998 (the "Credit Agreement") among United Road Services, Inc.
(the "Company"), various financial institutions (the "Banks") and Bank of
America National Trust and Savings Association, as Agent; (b) the Second
Amendment dated as of November 12, 1999 (the "Second Amendment") to the Credit
Agreement; (c) the Security Agreement dated as of June 16, 1998 (the "Security
Agreement") among the Company, various Subsidiaries of the Company and the
Agent; (d) the Guaranty dated as of June 16, 1998 (the "Guaranty") executed by
various Subsidiaries of the Company in favor of the Banks and the Agent; and (e)
the Company Pledge Agreement dated as of June 16, 1998 (the "Company Pledge
Agreement") between the Company and the Agent. Each document referred to in
items (c) through (e) above, as amended hereby, is called a "Credit Document".
Capitalized terms used but not defined herein shall have the meanings set forth
in the Amended and Restated Credit Agreement.
Each of the undersigned (i) confirms to the Banks and the Agent that
(a) each Credit Document to which such undersigned is a party continues in full
force and effect on and after the date hereof, as amended hereby, and is the
legal, valid and binding obligation of such undersigned, enforceable against
such undersigned in accordance with its terms, and (b) the obligations and
liabilities guaranteed or secured (as applicable) under each Credit Document
include, without limitation, the obligations and liabilities of the Company
under the Credit Agreement as amended by the First Amendment; and (ii) agrees
that each reference in each Credit Document to the "Credit Agreement" or any
similar term shall, after the date hereof, be deemed to be a reference to the
Credit Agreement as amended by the Second Amendment.
<PAGE>
IN WITNESS WHEREOF, this Confirmation has been duly executed as of the
day and year first above written.
UNITED ROAD SERVICES, INC.
By:
Title:
CITY TOWING, INC. d/b/a QUALITY TOWING
By:
Title:
AUTO SERVICE CENTER
By:
Title:
URS WEST, INC.
By:
Title:
URS SOUTHWEST, INC.
By:
Title:
URS MIDWEST, INC.
By:
Title:
URS SOUTHEAST, INC.
By:
Title:
URS NORTHEAST, INC.
<PAGE>
By:
Title:
URS TRANSPORT, INC.
By:
Title:
URS OF TENNESSEE, INC.
By:
Title:
BILL AND WAGS, INC.
By:
Title:
E & R TOWING & GARAGE, INC.
By:
Title:
EL PASO TOWING, INC.
By:
Title:
ENVIRONMENTAL AUTO REMOVAL, INC.
By:
Title:
EVANSTON RELIABLE MAINTENANCE, INC.
By:
Title:
<PAGE>
FAST TOWING, INC.
By:
Title:
GARRY'S WRECKER SERVICE, INC.
By:
Title:
NORTH SHORE RECYCLING, INC.
By:
Title:
NORTH SHORE TOWING, INC.
By:
Title:
ROUSE'S BODY SHOP, INC. d/b/a
ROUSE'S TOWING AND HAULING
By:
Title:
ARRI BROTHERS, INC. d/b/a
A & A TOWING SERVICE
By:
Title:
KEN LEHMAN ENTERPRISES, INC. d/b/a
SOUTHSTRIP TOWING
By:
Title:
<PAGE>
Accepted and Agreed to
this ________ day of
November, 1999.
BANK OF AMERICA, N.A.,
as Agent
<PAGE>
By:
Title:
EXHIBIT 11.1
<TABLE>
Weighted Average Shares
For the period ended
September 30, 1999
Shares issued Three months Six months
------------- ------------ ----------
<S> <C> <C> <C>
Shares outstanding at beginning of period 15,375,930 15,375,930 15,375,930
January 11, 1999 Issuance of shares for acquisition 825,834 825,834 792,559
January 12, 1999 Issuance of shares for acquisition
64,716 64,716 61,871
January 15, 1999 Issuance of shares for acquisition
41,655 41,655 39,366
January 27, 1998 Release of holdback shares
55,157 55,157 49,701
January 29, 1999 Issuance of shares for acquisition
18,531 18,531 16,563
January 29, 1999 Issuance of shares for acquisition
90,864 90,864 81,212
February 1, 1999 Issuance of shares for acquisition
63,534 63,534 56,087
February 22, 1999 Issuance of shares for acquisition
42,687 42,687 34,400
February 26, 1999 Issuance of shares for acquisition 104,752 104,752
82,881
March 1, 1999 Issuance of shares for acquisition 43,845
43,845 34,209
March 2, 1999 Issuance of shares for acquisition 17,266
17,266 13,408
March 5, 1999 Issuance of shares for acquisition 196,092 196,092 150,122
March 22, 1999 Issuance of shares for acquisition 55,944
55,944 39,345
April 7, 1999 Issuance of earnout shares 46,354 46,354 30,768
April 30, 1999 Issuance of shares for acquisition 39,808 39,808 22,310
April 30, 1999 Issuance of shares for options 1,000 1,000 560
July 24, 1999 Release of holdback shares 4,652 3,660 1,159
------------------------------------
Weighted average shares outstanding for basic earnings per share 17,089,000 16,882,451
Options outstanding at September 30, 1999: 1,285,300 shares; Total exercise
proceeds: 14,127,857; Average price of option $10.99 8,000 74,901
Warrants outstanding at September 30, 1999: 117,789 shares; Exercise
price: $12.86 per share; Average market value of Company
stock $3.90/$8.75 - -
Earnout shares issued on April 7, 1999; Stock price $4.69 - 16,958
Shares held in escrow related to acquisitions 748,805 692,862
=====================================
Total shares outstanding for fully diluted earnings per share 17,667,172
17,836,950
=====================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001056562
<NAME> UNITED ROAD SERVICES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,395
<SECURITIES> 0
<RECEIVABLES> 29,735
<ALLOWANCES> 2,281
<INVENTORY> 0
<CURRENT-ASSETS> 36,407
<PP&E> 91,266
<DEPRECIATION> 9,583
<TOTAL-ASSETS> 346,124
<CURRENT-LIABILITIES> 67,358
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 186,837
<TOTAL-LIABILITY-AND-EQUITY> 346,124
<SALES> 189,085
<TOTAL-REVENUES> 189,085
<CGS> 140,191
<TOTAL-COSTS> 180,843
<OTHER-EXPENSES> (137)
<LOSS-PROVISION> 1,399
<INTEREST-EXPENSE> 7,984
<INCOME-PRETAX> 133
<INCOME-TAX> 1,340
<INCOME-CONTINUING> (1,207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,207)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
