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Investment Add-On Memorandum March 2016 Daniel Singer

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Page 1: Investment Add-on Opportunity in Vehicle Towing Industry_City Wide Towing

Investment Add-On Memorandum

March 2016 Daniel Singer

Page 2: Investment Add-on Opportunity in Vehicle Towing Industry_City Wide Towing

Disclaimer

This Information Memorandum (the “Document”) concerning a proposed investment in the Vehicle Recovery industry has been compiled by Daniel Singer (the “author”) solely for information purposes. The information contained herein has been prepared to assist interested parties in making their own evaluation of the industry and does not purport to contain all the information that other parties may require. This Document includes certain statements, estimates, and projections with regard to the industry and market participants, which reflect various assumptions, all of which may or may not prove to be correct. The Document has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by the author to its fairness, accuracy, completeness or correctness. To the fullest extent permitted by law, the author does not accept any liability whatsoever for any direct or consequential loss arising from any use of the information contained herein. All material presented in this document, unless specifically indicated otherwise, is under trademark and copyright to the author.

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Table of Contents

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Contents

Page

Section A

Executive Summary 5

Company Profile 6

Section BIndustry Analysis

Automobile Towing in Canada 8

Competitive Dynamics 9

Demand Drivers 10

Regulatory Developments 12

Toronto Police Contracts 14

Rotational System 15

Competitive Landscape 16

Investment Thesis 18

Section C

Appendix

Competitive Landscape 20

Value Chain 22

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Section A: Executive Summary and Company Analysis

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Executive SummaryRegulations Shift Dynamics Of Vehicle Recovery Industry Structure

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Consolidate Vehicle Recovery industry in Canada through expansion of City Wide Towing service platform

to Ontario. Make add-on acquisition of Ontario Vehicle Recovery company holding exclusive contracts and those

who are in favorable positions from ongoing spike in legislation.Investment

Thesis

Police-Towing Contracts – Cities across Ontario are increasingly adopting individual towing contracts per

police division and ending the traditional open-market for police-towing calls. The adoption of contracts has

potential to change a major revenue segment of the industry into monopoly and oligopoly competitions.

RationaleTowing Regulations – Amid new towing regulations in Ontario, such as Bill 15 and Bill 30, lobbying efforts for

further control are gaining traction, whereby the industry could reinstate new rotational systems. Towing

providers elected as a part of rotational system must meet strict capital and operational requirements.

2

1

Market Outcomes

Rising barriers to entry for two major revenue segments – government and individual sourced towing.

Reduction in number of establishments in vehicle recovery industry in Ontario.

Increasing operating margins from higher standards towing fees derived from police contracts.

Increasing concentration and reduced fragmentation from larger market share for fewer establishments.

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Headquarters Calgary, AB

Founding 1963

Owners Rob Voelk – CEOWendy Voelk – VP

Revenue Streams

Individuals – Accidents and vehicle troubleCommercial – Auto clubs, insurance companies, equipment rental companies, auto dealershipsGovernment and Municipalities – Police contracts, fire departments, transport authority

Service Offering

Towing and Recovery – Light, medium and heavy duty, boosting, lockouts, fuel deliveryEquipment Transportation – Industrial and construction equipment and vehicles, high-end vehiclesSpecialty Services – Air cushion recovery, extreme recovery

Capabilities Fleet Size ~90 – 24/7 services, tilt bed carriers, 3 to 5 ton trucks, heavy duty wreckers, tilt bed landoll trailer, GPS tracking

Acquired Companies

Buster’s Heavy Towing Service, ATO Towing, B “I” Towing, Able Towing, Big Hill Towing, Sicotte Towing

Summary

City Wide Towing is the leading provider of vehicle recovery services in Alberta and the largest operator in the greater Calgary area

Market reach

Company ProfileCity Wide Towing

The company serves eight areas in southern Alberta, measuring approximately 5.5 thousand squared kilometers in market reach surrounding the greater Calgary area

Non-conformity analysis

The company has bifurcated customer experiences and registered a weighted average customer service score of 3.6 stars1

1Total score is a weighted average of the score and number of ratings in combination between Facebook and GoogleSource: Google Reviews; Facebook.com

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Section B: Industry Analysis

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Establishments in Canada

Industry AnalysisVehicle Recovery Services

Description

The industry tows light or heavy motor vehicles over short and long distances. Establishments may also provide incidental services, such as storage, emergency road repair, vehicle and equipment recovery and vehicle or equipment transport

Typically, a towing company charges a flat fee and mileage or an hourly rate based on the type of towing vehicle used Towing establishments must receive a towing license to service an area, such as a municipality in the province of Ontario

The industry is highly fragmented, where the top 50 companies account for 15% of revenue

In 2015, the industry generated US$6.1 billion, and is expected to increase at a CAGR of 5.0% over the next five years

There are approximately 8,000 towing providers in the US

Industry snapshot

Key Drivers

Number of vehicle accidents – the greater number of automobile accidents, the higher the demand for industry services to remove vehicles and clear highways and roads

Number of motor vehicle registrations – the number of vehicle registrations reflects the number of vehicles on the road, and thus potential breakdowns demanding towing service

Average age of vehicle fleet – the age of motor vehicles can influence the occurrence of breakdowns and accidents, as older vehicles suffer mechanical failure more often than newer and require towing services

Canadian marketAmerican market

23%

34%

43%

Commercial CustomersLocal and State GovernmentsIndividuals

$ 6.1 B

Source: IBISWorld Industry Report, Automobile Towing in the US; First Research Industry Profile, Motor Vehicle Towing Services; Statistics CanadaNote: American related figures in USDNote: Establishments in Canada are those that employ truck drivers. There are 1,500 non-employers and 1,018 employers for a total of 2,518 operators.

The Canadian industry is highly fragmented and extremely competitive

55.0% of companies employ less than four workers, while 45.0% of companies employ between 5-99 employees

Operators are most concentrated in Ontario, where regulations are shifting the industry structure

Low to moderate concentration among participants with no industry incumbent

Low fuel prices expand operating margins

ABBC

MNNBNFNTNSNUONPEIQCSKYT

126158

3131

112

250

3637

22240

2

Towing Service Establishments per Province

Strict regulation gaining traction coupled with high fragmentation combine to present opportunity to build a growth platform and consolidate niche industry

Major market segmentation

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Industry AnalysisCompetitive Dynamics

Small number of established participants serve overall market: two national companies with extensive distribution networks – Miller Industries and Jerr-Dan – dominating the North American market

Many buyer segments for wreckers: towing and recovery agencies, automobile dealers, the salvage industry, equipment transport service providers and large vehicle fleet operations

Supplier Power: High

Source: Statistics Canada; Conference Board of Canada, Automated Vehicles; Financial Post, “Watch out CAA, New roadside assistance apps seeking to ‘revolutionize’ towing industry”, 2014

New regulations create monopoly and oligopoly for law enforcement market of towing calls

Capital intensity is moderate: fixed costs include vehicles, communication infrastructure, municipal licensing for towing in the greater Toronto area can exceed $80,000 per year

Licenses are required to service individual municipalities in Ontario

Threat of New Entrants: Low

• Significant breakdown in revenues between non-consent and consent towing makes buyer power low and high case by case

• Non-consent towing ordered by law enforcement – prices are high and non-negotiable

• Consent towing from individuals seeking towing on their account negotiate prices and shop for cheapest service across homogeneous, fragmented, and competitive market vendors

Buyer Power: Medium

Automated Vehicles (AVs) can reduce 93.0% of collisions that currently involve human error in Canada

Uber app for towing can disrupt the market for consent derived towing segment, driving prices down

Substitutes also include alternative forms of travel, such as bus, air and rail

Threat of Substitutes: Low

In Canada, the industry is highly fragmented, 1,018 establishments, and Ontario and Quebec account for approximately 65% operators

Heavy marketing to individual customer segment

Industry Rivalry: High

Truck Distributors

Truck Manufacturers/Up-Fitters

High barriers to entry from law enforcement contracts and regulation trends coupled with low buyer leverage for non-consent towing calls shifts industry structure into monopoly and oligopoly

Towing Services Apps

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British Columbia

Saskatchewan

Manitoba

Ontario

Quebec

Canada

11.1 years

11.3 years

10.0 years

8.6 years

7.2 years

9.3 years

Industry AnalysisDemand Driver Analysis – Size And Age Of Vehicle Fleet In Canada

Source: HIS Automotive, “Polk finds average age of light vehicles continues to rise”; Desjardins Economic Studies, Quebecers and their automobiles; Conference Board of Canada, Canada’s Motor Vehicle Parts Manufacturing Industry; Desrosiers Automotive Reports, Total Light Vehicles in Canada; Allstate, 2015 Safe Driving Study; Statistics Canada, Canadian Motor Vehicle Traffic Collision Statistics 2013; TD Economics, Canadian Auto Sales to Downshift From Fifth to Fourth Gear; Scotiabank, Global Auto Report, 20161Measured by replacement value of roads

In 2014, there were 21.7 million Canadian car and light truck registrations, representing a 2.2% growth rate over the previous period

Ontario and Quebec lead in vehicle sales

Vehicle registrations in Canada have risen steadily Auto sales in Canada set a record in 2015, with 1.89 million new

vehicles sales, and 1.9 million forecasted for the 2016 period

Strong Canadian vehicle sales outlook

Aging vehicle fleet of Canada In 2013, the average age of a Canadian passenger vehicles was 9.3

years, and is trending higher• Duration of vehicle loan terms have lengthened as 80% of loans are

72 months or greater

Average age of vehicles in Canada

Despite constant growth in vehicle sales for Canada expected over the next year, Ontario and Quebec are forecast to grow by 1.4%, driven by stronger demographic and income trends

Approximately 85% of vehicles acquisitions in 2014 were purchased as opposed to leased, contributing to the aging fleet of Canadian vehicles

06 07 08 09 010 011 012 013 01417.00

18.00

19.00

20.00

21.00

22.00

-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%

Car and Light Duty Truck Registrations (millions)Growth (YoY)

Vehicle sales by province (thousands)

772,000 450,000

Ontario Quebec

2013 2014 2015 20160

100200300400500600700800900

Ontario Quebec Alberta British Columbia AtlanticManitoba Saskatchewan

06 07 08 09 010 011 012 013 014 015 0160

0.20.40.60.8

11.21.41.61.8

2

Vehicle sales in Canada (millions)

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Source: HIS Automotive, “Polk finds average age of light vehicles continues to rise”; Desjardins Economic Studies, Quebecers and their automobiles; Conference Board of Canada, Canada’s Motor Vehicle Parts Manufacturing Industry; Desrosiers Automotive Reports, Total Light Vehicles in Canada; Allstate, 2015 Safe Driving Study; Statistics Canada, Canadian Motor Vehicle Traffic Collision Statistics 20131Measured by replacement value of roads

Ages 15-19 – There are over 1.2 million licensed drivers under the age of 19 in Canada

This age group represents relatively inexperienced and skilled drivers, thereby increasing the risk of collisions

In 2013, the age cohort 15-19 years of age represented 15.2% of all passenger fatalities and 16.1% of all serious injuries to passengers in Canada

Ages +65 – On a per km basis, seniors are the most collision prone drivers In 2014, more than 3.5 million senior driver collisions were reported

In 2013, seniors aged 65+ represented 19.2% of all passenger fatalities and 11.7% of all serious injuries to passengers in Canada

Deteriorating road quality and growing cohort of poor drivers contributes to likelihood of vehicle damage and fuels demand for roadside assistance

Metropolitan population increasing in size and concentration

Car accidents in Canada on the rise, especially in Ontario Young and senior drivers most prone to collisions

Road quality in Canada deteriorating despite repairs

Very Good24%

Good37%

Fair23%

Poor10%

Very Poor6%

-1%

1%

3%

5%

7%

9%

11%

13%

15%

-80%-70%-60%-50%-40%-30%-20%-10%0%10%20%

7% 7% 7% 6% 6% 6% 6% 6% 6% 6% 5%

0%16% 12% 7% 2% 8% 5% 10%

1%9% 8%

Collision claims frequency (per 100 cars) 2015 Growth in Collisions from 2014 to 2015

39% of Canadian roads are classified as Fair to Very Poor physical condition. Fair to Very Poor indicates the structure requires immediate attention, or is unfit for sustained service

At the current reinvestment rate – 1.1%, Canadian road infrastructure will decline in the condition over time

The replacement value amounts to $40 billion

Car accidents are on the rise in Canada – there were 7.3% more reported collisions in Canada in 2015 compared to the previous year

Accident claims in Toronto grew by 2.0% over the same period

Growing population in metropolitan areas in Canada

Canada

Calgary

Saskatoon

Kelowna

Toronto

Vancouver

St. John's

Ottawa–Gatineau

Ottawa–Gatineau, Quebec part

0 0.5 1 1.5 2 2.5 3 3.5 4

Change in population size (%)

Population of Canadian city growth 2014 / 2015

Physical condition of Canadian roads1

Fair = requires attention, signs of deteriorationPoor = increasing potential affecting service, approaching end of service lifeVery Poor = unfit for sustained service

Industry AnalysisDemand Driver Analysis – Collisions And Repairs In Canada

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Source: CBC News, “Ontario aims for tougher tow truck rules”, 2015; CBC News, “Tow truck tricks can hit you after an accident”, 2015Note: License to tow in Toronto: Owners must provide a Certified copy of proof of insurance policies, including a minimum of $100,000 comprehensive general liability insurance and $50, 000 cargo liability insurance.

British Columbia, Manitoba and Saskatchewan have provincially-run insurance companies that oversee towing services, regulate pricing and deter fraud Those centrally managed insurance models provide a greater degree of oversight

By contrast, the towing industry in Ontario is unregulated and towing across the province is marked by frequent horror stories of aggressive sales techniques and dishonesty Many collision victims fall prey to exorbitant storage and repair fees from towing operators who are affiliated with auto body shops

Exclusive Police

Contracts

Regulatory environment in Ontario

Collision chasing – Tow trucks race to collision scenes to get towing business from accident victims. Rampant across Ontario. Fines for chasing do not properly deter collision chasers

High towing rates – Exorbitant pricing schemes employed by various companies have shot up insurance premiums for drivers

Under insured/Under equipped – Significant amount of non-employed operators in towing industry with very few trucks are under insured and under equipped to conduct proper towing services

Kickback corruption – Tow trucks take towed cars to affiliated auto body and garages that provide cash kickbacks for referral of business. In many cases, the vehicle is not in need of repair or towing and the victim is ripped off

Resulting effect

Bill 15

Bill 30

CVOR

Industry problems Regulations

The Fighting Fraud and Reducing Automobile Insurance Rates Act, which was passed in 2014, provides legal protections against unethical business practices and accountability for the few tow truck drivers and owners who take advantage of unsuspecting consumers

Explanation

Reduction in number of towing operators due to increased storage and operating requirements

Lobbying efforts for police to arrive on an accident scene first can reduce the operators whose primary source of revenue is from collision chasing

The Highway Incident Management Act, which is under review, is intended to completely change the system in which tow trucks respond to collisions and relieve some of the gridlock traffic in the GTA

In effect Jan 1 2017, the Commercial Vehicle Operator’s Registration system will require vehicles commonly known as tow trucks and other vehicles used for towing, such as the flatbed trucks known as "tilt and loads", will require a CVOR certificate, where they become subject to inspection on hours on duty, and vehicle equipment inspections

New limitations on towing industry can hurt smaller operators who work beyond regulation hours and avoid capital expenditures for

Towing services receive exclusive contracts to tow and service police sourced roadside assistance, restricting access to significant market of other towing providers – as much as 80% of business can be derived from police-towing calls

Monopoly and Oligopoly industry structure for winners of police contracts

Increased margins Reduced establishments

Industry AnalysisOntario Regulatory Developments

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Police Contracts

Collision Chasing

Source: CTV News, “Towing company can no longer bid for London police contract”, 2014; The London Free Press, “Ross Towing monopoly still stands”, 2015; Canadian Towing and Recovery, “Bill 30 will change how to trucks respond in Ontario”, 2015; Metro New, “Ottawa police staging fake accidents to ticket tow truck collision chasers”, 2015

Timeline of developments in addressing Collision Chasing and Police Contracts

In 2012, Toronto Police award a lucrative 3-year towing contract to JP Towing

October 2015

Bill 30, the Highway Incident Management Act, aimed at improving highway driver behaviour relating to highway accidents and provide accurate and timely information about incidents to drivers to avoid paralyzing gridlock in the GTA

November 2014

Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, is passed to make tow providers to publish their rates, provide itemized invoices before receiving payment, to accept credit card payments, disclose their business relationships, give upfront written estimates of the repair costs and the final cost cannot be 10% above the initial written amount

March 2015

Police are dispatching two officers for straightforward collision in Ottawa, - one to handle the people involved and the other to issue tickets to tow trucks who show up on the scene illegally and are within 100 metres of the scene. The police have issued 277 tickets to tow truck driers in Ottawa in 2015 for chasing collisions; the fine is $175

In 2015, new London Police exclusive towing contract awarded to Ross’ Services, ending a 35 year tradition or rotational system for police calls

In 2011, Downtown Towing Group goes bankrupt after new criteria for Toronto police-towing contract renders them unqualified

As many as 30 cities across Canada have police-towing contracts and over 16 cities in Ontario contract police related towing

January 2016

Tow truck fines for collision chasing quadrupled in last year

Industry AnalysisOntario Regulatory Developments

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Source: Toronto Police; The Star, “Your car’s just been towed. Now what?”, 2015; The Star, “Towing companies snub Toronto’s low-tow zone”, 2012; Toronto Star, “Cops trying to put me out of business”, 2011; Canadian Towing and Recovery, “Ontario’s proposed towing and storage rules to bring big changes”, 2015; RichmondHill Tow Truck Licensing Overview; CBC News, “What to do if your car is towed in Toronto”, 20151Toronto Star, “Tow-truck confidential”, 20142Toronto Star, “Relationship between towing companies, board under scrutiny”, 1999

District 1 JP Towing Divisions 11, 12, 13, 14, and 53 $160 for towing$70 per day for storage

12,775 – $3.0 million30 – 40 tows/day

District 2 Bill and Son Towing Divisions 22, and 23 $150 for towing$71 per day for storage

-

District 3 Abrams Towing Divisions 31, 32, 33, and 53 $165 for towing$65 per day for storage

-

District 4 Williams Towing Divisions 41, 42, 43, 54 $149 for towing$80 per day for storage

-

District 5 A-Towing Divisions 51, 52, and 55 $158 for towing$50 per day for storage

4,672400 tows/month

Toronto police-towing contracts

Toronto’s towing contracts for police tow calls is separated on contract by police districts – five districts with individual towing per district

3,000 vehicles towed daily in the Greater Toronto Area1

There were more than 50,000 vehicles towed in 2015 from by-law infractions and major accidents2

Over 16 cities in Ontario contract police related towing to an exclusive group of towing providers

Location Company Police Divisions Pricing Tows per year

Toronto City police-towing contracts restrict new entrants, resulting in a government-induced monopoly structure and a reduction in industry establishments

Toronto police-towingMarket size1

+$16.0 Million

Industry AnalysisToronto Police-Towing Contracts

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Rotational groups of towing providers are growing in popularity, screening members by criteria and limiting market-entry• Drivers need to have a certain amount of

equipment, insurance and training to qualify for the list and anyone caught collision chasing gets kicked off, forming a government controlled oligopoly

• In several cities, including Hamilton, Burlington, and Oakville, there’s a rotation system in place, so that all operators get a tow opportunity without chasing

Source: Toronto Police; The Star, “Your car’s just been towed. Now what?”, 2015; The Star, “Towing companies snub Toronto’s low-tow zone”, 2012; Toronto Star, “Cops trying to put me out of business”, 2011; Canadian Towing and Recovery, “Ontario’s proposed towing and storage rules to bring big changes”, 2015Note: District 6 is the most lucrative district. Unknown contract holder. Potentially A Towing or Downtown Group Towing and Storage. Monthly rent in District six averages at $10,000/acre

City police-towing contracts in Ontario

Police Contract Company

Ottawa District 1 Gervais Towing

Ottawa District 2 Ottawa Metro Towing

Barrie (Light Duty, Heavy Duty) Graves Towing, Currie Heavy Towing

11 Division, 12 Division (Heavy Duty) Lyons Auto Body

12 Division and Airport Division Atlantic Auto Body (Light Duty)

21 and 22 Division Hansen Auto Parts and Towing

Markham Cardinal Towing

Bradford Elliot's Towing

Richmond Hill York Regional Traffic Services

London Ross’ Towing

Toronto District 1 JP Towing

Toronto District 2 Bill and Son Towing

Toronto District 3 Abrams Towing

Toronto District 4 Williams Towing

Toronto District 5 A Towing

Rotational program consideration

Regulatory Development

Rotational System

Joey Gagne, owner of Abrams Towing has been mentioned in advisory of the current legislations, bill 15 and 40, and implementing a rotational system

In combat to collision chasing, Hamilton tow truck drivers caught soliciting services on the scene of an accident can face fines between $5,000 and $100,000

Industry AnalysisNew Regulations To Roadside Assistance

excluded

Provider #6

Provider #7

Provider #8

Provider #9

Provider #10

Provider #11

Provider #12

Provider #13

Provider #14

Provider #15

Provider #16

Provider #17

Provider #18

Provider #19

Provider #20

Provider #21

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Selected market participants

Fleet +160Employees 200Tows / year 200,000

Light, Medium, Heavy-duty

Flatbeds Tri-axle trucks 1-ton Wreckers

50-ton Peterbilt Challenger

Hydraulic float trailers GPs tracking

Corporate: Mark Motors, Penske, Ryder, Toronto Transit Commission (Toronto Public Transport)Contract: Police of Toronto

Toronto, Mississauga, Hamilton, North York, Oakville, Windsor, Ottawa, Burlington. BramptonAbram’s Towing Service

1972

Company Locations Size Clients Offering Suite & Equipment

Fleet +100 Flatbeds Heavy-duty (designated for Police)

Corporate: Major insurance companies, Major auto dealerships, vehicle fleetsContract: Peel Regional Police

Mississauga, Brampton, Wolfedale, Orangeville, Meadowvale, Oakville, Atlantic Collision Group

1975

Fleet +60Tows / year: ~14,000

Light, Medium, Heavy-duty

Chevy 3500 Vulcan F450 Wrecker 25-ton NRC

50-ton NRC 65-ton Rotator Slider Flatbeds Corporate: Cintas, Hydro

Contract: Toronto Police

Toronto, Brampton, Mississauga, Woodbridge, Richmond Hill, Newmarket, York, BarrieJP Towing

1988

Fleet +40 Medium, Heavy-duty FlatbedsContract: Toronto Police Service,

Toronto EMSGreater Toronto AreaWilliams Towing

1976

Fleet +25Employees ~20

Light, Medium, Heavy-duty (5) Flatbeds

Corporate: UPS, FedEx, PurolatorContract: Ottawa City Vehicles, OPP, RCMP

Toronto, Mississauga, Hamilton, North York, Oakville, Windsor, OttawaGervais Towing

1934

Fleet +30Employees 30Police tows / year 3,000Clients +1,000

Light, Medium, Heavy-duty (8)

60-ton, 75-ton Rotator Kenworth

Air cushion recovery Emergency spill

response

Corporate: Ryder, Penske, Herb, UPS, Fedex,Contract: London Police, Ontario Provincial Police

London, Southern Ontario

Ross’ Service1957

Source: Primary research from interviews with company employees; Capital IQ; Company Websites; Mergent Online Database; Privco Private Company Database;

Industry AnalysisCompetitive Landscape

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Selected market participants

Company Locations Size Clients Offering Suite & Equipment

Fleet +37Employees 30

Light, Medium, Heavy-duty

80-ton Rotator 3-5 ton Wreckers Flatbed

Air Cushion recovery

N/AWindsorBell River

Myers Towing1972

Fleet +60Employees Tows / year 36,500

Light, Medium, Heavy-duty

50-ton, 35-ton, 1-ton wreckers

Flatbeds

N/AGTASurrounding areas

KBW Towing1980

N/A

Towing Heavy Towing Specialized Towing Roll-off / Tilt & Load Flatbeds

Double Drop Float Covered Transport Extendable Trailers Dump Trucks

Waterloo, Kitchener, Cambridge, Guelph

Becker Bros. Towing1987

Fleet +50Storage 2.5 acresOffice 20,000 ft2

Light, Medium, Heavy-duty 50-ton, 20-ton Slider Flatbeds GPS communications Licensed to operate throughout Canada and US

Corporate: Greyhound, Bell, Fedex, UPS, Hertz, Mercedes Benz, Frito Lay, Hydro OneContract: Police of Toronto, Toronto Transit Commission

Toronto, Mississauga, Hamilton, North York, Oakville, Windsor, OttawaA Towing Services

1962

Fleet +50

Light, Medium, Heavy-duty 65-ton S/R Incident Manager 50-ton, 20-ton Slider 1-ton Wrecker

N/A

Toronto, Mississauga, Hamilton, North York, Oakville, Windsor, Ottawa0Bill & Son

1982

Indication of fast growing towing company, with license growth from Ste-Catherine to BarrieClassic Towing

Industry AnalysisCompetitive Landscape

Source: Primary research from interviews with company employees; Capital IQ; Company Websites; Mergent Online Database; Privco Private Company Database; Private and Confidential | 17

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Investment Thesis

Investment Thesis

Regulations – New towing regulations to address collision chasing and other unscrupulous practices in the industry are expected to reduce the number of participants and limit entry

• Ontario’s towing industry is highly fragmented with low concentration, with approximately 1,100 towing providers in Ontario, of which, almost 750 are non-employers, servicing with one vehicle/wrecker

• Individual towers are dependent on towing calls from individuals in collisions and source these calls from intercepting collisions dialed to 9-11, and chasing those collisions, which now has become illegal and subject to fines

Police Contracts – Increasing number of cities abolishing traditional rotation system for police-towing calls and adopting the issuance of exclusive towing contract per police district

• There are already 16 cities in Ontario that contract towing services for police enforcement sourced towing calls, and over 30 in Canada

• The contracts are typically three years in length and are consistent to the contract winner, providing visibility on recurring yearly revenues

Rationale

Expand City Wide Towing service platform across Canada to Ontario through add-on acquisition of towing provider which is currently servicing police contracts, extensive corporate accounts, or individual towing calls

• Targeted towing company is the beneficiary of stable and quality cash flows from contracts, which can be enhanced through further consolidation across Ontario municipalities

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Section C: Appendix

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Competitors list of towing establishments in Canada

Company HQ Employees Rev. Est. Tows/year Fleet size Associations Ownership

A Action Towing Burlington, ON 10 -  1995  - +10 STA  -A Towing Services Toronto, ON  -  - 1962  -  - ORG Alex AnnissimoffA&B Towing Grande Prairie, AB  -  - 1999  - +10  - - A-1 Towing Hannon, ON  -  - 1953  -  - ORG Gail DaleyAbrams Towing Services Toronto, ON 200  - 1984 200,000 +160 ORG, PTAO Joey GagneAction Towing and Automotive Trenton, ON  -  -  -  -  - ORG William McIntoshAggressive Auto Towing Abotsford, BC  -  -  -  -  - ARA - Astro Towing Saskatoon SK  -  - 1988  - +10 STA  -Atlantic Collision Group Mississauga, ON  -  - 1972  - +100  -  -Bayview Towing Surrey, BC  -  - 1987  - +23 BCAA, WCABA, ARA  -Becker Bros. Towing Kitchener, ON  -  -  -  -  - ORG Henry BekerBig Rig Towing Calgary, AB  -  -  -  - +9  -  -Bill & Son Towing Toronto, ON  -  - 1982  -  -  -  -Brad's Towing Saskatoon SK 25  - 2001 22,500 +26 STA  -CA Towing Milton, ON  -  -  -  - +14 ORG Anne AkkermanCardinal Towing Markham, ON  -  - 1995  -  -  - Doug CardinalCharette Service d'Auto Inc St-Hubert, QC 50 3 - 5 M 1981  -  -  - Pierre CharetteCity Wide Towing Calgary, AB  -  - 1963  - +90  -  -Cliffs Towing Edmonton, AB  -  - 1953  - +80  -  -Cornwall Towing Coornwall, ON  -  - 1984  -  - ORG Duncan CooperCounty Towing Harrow, ON  -  - 1978  -  - PTAO Derek DidoneCo-up Towing Toronto, ON 28  - 1980  - +17 PTAO Gadi CohenCoxon's Towing Services Maidstone, ON  -  - 1961  - +11 ORG Brad CoxonCurrie Heavy Towing Barrie, ON  -  - 1949  -  - -  Glen CurrieD&L Towing Timmins, ON  -  -  -  -  - ORG Luc MigneaultDons Towing Kamloops, BC  -  -  -  - +16 BCAA  -Drakes Towing Vancouver, BC  -  -  -  -  - -   -Dynamic Towing Toronto, ON  -  -  -  -  -  -  -Edwards Towing and Recovery Huntsville, ON  -  - 1970  - +10 ORG Bill EdwardsElliots Towing Bradford, ON 22  -  -  - +19 -   -Feenstra Towing Wyoming, ON  -  - 1957  -  - ORG Jamie FeenstraG&W Jellys Towing New Liskeard, ON  -  -  -  -  - ORG To JellyGervais Towing Gloucester, ON  -  - 1946  - +30 ORG Jamie GervaisGobbo Towing & Recovery Sudbury, ON  -  -  -  -  - ORG Andy GobboGodbout Auto Services Kenora, ON  -  - 1983  - +37 ORG Anna GodboutGraves Towing Barrie, ON  -  -  -  -  - -   -Hansen Automotive Parts and Towing Brampton, ON  -  - 1969  -  -  -  -Harolds Towing Grande Prairie, AB 12  -  -  -  -  -  -Herb's Towing Vanleek Hill, ON  -  -  -  - +10  -  -

Source: Capital IQ; Company Websites; Mergent Online Database; Privco Private Company Database;

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Page 21: Investment Add-on Opportunity in Vehicle Towing Industry_City Wide Towing

Competitors list of towing establishments in Canada

Company HQ Employees Rev. Est. Tows/year Fleet size Associations Ownership

Jacks towing Service Kingston, ON 20  - 1986  - +20  - - Jamie Davis Motor Truck and Auto Towing Hope, BC  -  -  -  -  - WCABA  -Johnny's Boyuk Towing Lively, ON  -  -  -  -  - ORG Robert BerthiaumeJohnnys Towing ON 55  -  -  -  -  -  -JP Towing ON  -  -  - +14,000 +60 ORG John Paul CruzKBW Towing Etobicoke, ON 42  -  - 36,500 +35 ORG Dan HissonKells Services Collingwood, ON  -  -  -  -  - ORG Tom KellsLakeland Towing Prince Albert, SK  -  -  -  - +20  -  -Lyons Auto Body Shop Mississauga, ON  -  -  - 4,260 +35  -  -Maple Ridge Towing Maple Ridge, BC  -  - 1981  -  -  -  -Marios Towing Kelowna, BC  -  - 1995  - +60  -  -McMurray Towing Fort McMurray, AB  -  - 1970  - +64  -  -Meteor Service de Remorquage QC 40  - 1970  - +52  - Rheal and Michelle LandryMyers Towing Belleriver, ON 30  - 1972  - +37 ORG Stan MyersOttawa Metro Towing Ottawa, ON  -  -  -  -  -  - - Pine Ridge Automotive & Towing Thessalon, ON 14  - 1998  - +17 ORG Mark GravesPreferred Towing Sarina, ON  -  - 1991  - +9 ORG Gary VandenheuvelReal Grand'Maison Inc QC 20 1 - 3 M 1965  -  -  -  -Reid's Towing ON  -  -  -  -  -  - - Remorquage Belanger QC 30 1 - 3 M 1977  -  -  -  -Remorquage longueuil QC 40  - 1979  - +35  - Roy NormandRemorquage Roubillard QC 17 1 - 3 M 1995  -  -  - Andre RobillardRemorque Betrand QC  -  -  -  - +8  -  -Ross' Towing and Transportation London, ON 30  - 1957 3,000 +25 ORG Dave RossService de Remorquage Direct QC 80 10 - 25 M 1974  - +40  - Pierre DaneauServices Routiers Uni Pro QC 15 1 - 3 M 1982  -  -  - Stephane BerryStandish Towing Banff, AB  -  - 1950  - +15  -  -Stellar Roadside North York, ON  -  -  -  -  -  -  -Superior Towing Edson, AB  -  -  -  -  - WCABA  -Tonys Towing ON  -  - 1968  -  -  -  -Totem Towing Victoria, BC  -  -  -  - +30 ARA, BCAA  -Transport Specialise RDC QC 40 5 - 10 M  -  - +40  - Annie FortierUnited Towing Services Canmore, AB  -  - 1969  -  - WCABA  -West Island Towing Montreal, QC 15  -  -  -  -  -  -Western Auto Wreckers and Towing Nelson, BC  -  - 1970  - +10 -   -Williams Towing Service Toronto, ON  -  - 1976  - +40 ORG John BlueJacks towing Service Kingston, ON 20  - 1986  - +20 -   -Jamie Davis Motor Truck and Auto Towing Hope, BC  -  -  -  -  - WCABA  -Johnny's Boyuk Towing Lively, ON  -  -  -  -  - ORG Robert Berthiaume

Source: Capital IQ; Company Websites; Mergent Online Database; Privco Private Company Database;

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Page 22: Investment Add-on Opportunity in Vehicle Towing Industry_City Wide Towing

Tow truck Up-Fitters / Manufacturers and Distributors

Company Type HQ Employees Revenue Est. Comments

A&A Auto and Truck Mfg. FL 63 19 M -  - 

B&B Industries Mfg. IN 40 12 M  -  -

Danco Products Mfg. PA  -  -  -  -

Dual-Tech Mfg. TN  -  -  -  -

Dynamic Manufacturing Mfg. VA  -  -  -  -

Godwin Manufacturing Mfg. NC  -  -  -  -

Jerr-Dan Mfg. MD  - ~ $100  - Purchased by Oshkosh Corp in 2004 for $80 million

Kilar Fabrication Mfg. OH  -  -  -  -

Ledwell Mfg. TX  -  - 1946  -

Metro Tow Truck Mfg. ON  -  -  -  -

Miller Industries Mfg. TN  - 493 M  -  -

NRC Industries Mfg. QC 102 15 M 1995  -

Recovery Industries Mfg. MO  -  -  -  -

Valew Mfg. CA  -  - 1954  -

Canada DEL Equipment Dist. QC; NB - 2 M  -  -

Canada H.R. Runciman & Co. Dist. ON - - - -

Canada Towtruck Dist. BC - - - -

Canadian Towing Equipment Dist. ON - - - -

Commercial Truck Equipment Dist. AB - - - -

Eagle Towing Equipment Dist. ON - - - -

James Western Star Dist.  AB - - - -

Les Equipments Twin Dist. QC - - - -

Nelson Truck Dist.  AB - - - -

Northern Alberta Sales Dist. AB - - - -

PM Industries Dist. BC - - - -

Source: Capital IQ; Company Websites; Mergent Online Database; Privco Private Company Database;

AppendixValue Chain Analysis

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