<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1996
REGISTRATION NO. 333-05293
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
DYNAMEX INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4215 86-0712225
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
2630 SKYMARK AVENUE
SUITE 610
MISSISSAUGA, ONTARIO L4W 5A4
(905) 238-6414
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
ROBERT P. CAPPS
VICE PRESIDENT-FINANCE AND CORPORATE DEVELOPMENT
ONE GALLERIA TOWER
13355 NOEL ROAD, SUITE 1650
DALLAS, TEXAS 75240
(214) 960-4859
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies To:
<TABLE>
<S> <C>
CROUCH & HALLETT, L.L.P. SONNENSCHEIN NATH & ROSENTHAL
717 NORTH HARWOOD, SUITE 1400 8000 SEARS TOWER
DALLAS, TEXAS 75201 CHICAGO, ILLINOIS 60606
ATTN: BRUCE H. HALLETT ATTN: MICHAEL M. FROY
(214) 953-0053 (312) 876-8000
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(2) PER SHARE(3) PRICE(2)(3) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value(1)............. 3,565,000 shares $12.00 $42,780,000 $14,752
============================================================================================================
</TABLE>
(1) Includes 465,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Includes associated rights (the "Rights") to purchase one one-hundredth of a
share of Series A Junior Participating Preferred Stock, par value $.01 per
share. Rights initially are attached to and trade with the Common Stock of
the Registrant. The value attributable to such Rights, if any, is reflected
in the offering price of the Common Stock.
(3) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(o).
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
DYNAMEX INC.
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K Showing
Locations in the Prospectus of Information Required by Part I of Form S-1.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEMS AND HEADINGS LOCATION OR CAPTIONS IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Cross Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front Cover Page of Prospectus;
Additional Information; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; The Company; Risk
Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Not applicable
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered................................. Prospectus Summary; Risk Factors; Dividend
Policy; Description of Capital Stock;
Shares Eligible for Future Sale
10. Interests of Named Experts and Counsel..... Legal Matters
11. Information with Respect to the
Registrant................................. Prospectus Summary; The Company; Risk
Factors; Dividend Policy;
Capitalization; Selected Consolidated
Financial Data; Pro Forma Financial
Information; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal Stockholders; Description of
Capital Stock; Shares Eligible for
Future Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not applicable
</TABLE>
<PAGE> 3
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED JULY 10, 1996
PROSPECTUS
3,100,000 SHARES
[DYNAMEX LOGO]
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Dynamex
Inc. Prior to this Offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $10.00 and $12.00 per share. See "Underwriting" for
information relating to the determination of the initial public offering price.
Application has been made to have the Common Stock approved for quotation on the
Nasdaq National Market under the symbol "DYMX."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total(3).......................... $ $ $
============================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $800,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 465,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If all such shares are
purchased, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $ , $ and $ , respectively.
The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by them and subject to their right to reject
orders in whole or in part. It is expected that delivery of the certificates for
the shares of Common Stock will be made on or about , 1996.
WILLIAM BLAIR & COMPANY HOAK SECURITIES CORP.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 4
[MAP REPRESENTING COMPANY BRANCHES TO BE INSERTED]
---------------------
The Company intends to distribute to its stockholders annual reports
containing consolidated financial statements audited by an independent public
accounting firm and quarterly reports containing unaudited consolidated
financial information for each of the first three quarters of each fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information herein
(i) assumes no exercise of the Underwriters' over-allotment option and (ii) has
been adjusted to give effect to the 4 for 1 split of Common Stock, par value
$.01 per share (including the associated preferred stock purchase rights, the
"Common Stock") effected on June 3, 1996. See "Description of Capital Stock" and
"Underwriting." References herein to the "Company" or "Dynamex" mean Dynamex
Inc., a Delaware corporation and its subsidiaries unless the context otherwise
requires. References herein to "Dynamex Express" mean the ground courier
operations of Air Canada purchased by the Company in May 1995. References herein
to "Mayne Nickless" mean the on-demand ground courier operations of Mayne
Nickless Incorporated and Mayne Nickless Canada Inc. purchased by the Company in
December 1995.
THE COMPANY
The Company is a leading provider of same-day delivery and logistics
services in the U.S. and Canada. Through internal growth and acquisitions, the
Company has built the only national network of same-day delivery and logistics
systems in Canada and has established operations in 10 U.S. metropolitan areas
from which it intends to build a national network in the U.S. The Company
capitalizes on its routing, dispatch and vehicle management expertise developed
in the ground courier business to provide its customers with a broad range of
value added, same-day distribution and logistics services.
Through its network of branch offices, the Company provides same-day,
door-to-door delivery services utilizing ground couriers for intra-city
deliveries and third party air transportation providers in conjunction with
ground couriers for inter-city deliveries. The Company's same-day delivery
services include both on-demand and scheduled deliveries. On-demand services are
typically unscheduled deliveries of time-sensitive materials and include
deliveries of inventory made on a just-in-time basis from strategic stocking
locations managed by Company personnel. Scheduled distribution services
encompass recurring, often daily, deliveries provided on a point-to-point basis
or deliveries that require intermediate handling, routing or sorting of items to
be delivered to multiple locations. The Company also offers fleet management
services, whereby the Company assumes complete responsibility for providing and
managing a fleet of dedicated vehicles at a customer site. The Company's
on-demand delivery capabilities are available to supplement the scheduled
distribution and dedicated fleets as necessary.
The Company believes that certain industry trends have created significant
growth opportunities for the Company. While historically same-day delivery
service primarily related to downtown document deliveries, technological
developments such as facsimile and electronic mail have increased time
sensitivity in a variety of business transactions, thereby increasing the demand
for the same-day delivery of non-faxable items. Additionally, in an effort to
control costs and focus on primary competencies, many businesses are seeking to
reduce their reliance on in-house transportation departments by turning to third
party experts to provide transportation logistics services. To date, the
same-day delivery and logistics industry has been highly fragmented, and
services have been available primarily on a local basis. The Company believes
that this market fragmentation creates substantial consolidation opportunities
for same-day delivery and logistics companies with national marketing efforts
and operations.
The Company intends to expand its operations in the U.S. and Canada in
order to capitalize on the demand of local, regional and national businesses for
innovative same-day distribution solutions. The key elements of the Company's
business strategy are as follows: (i) increase customer utilization of primary
services at each location, (ii) target national and regional accounts, (iii)
create alliances with strategic partners and (iv) pursue acquisitions of high
quality same-day delivery companies.
3
<PAGE> 6
The Company was founded in 1992 as Parcelway Systems Holding Corp. In May
1995, the Company acquired Dynamex Express, the ground courier operations of Air
Canada, which was led by Richard K. McClelland, the Company's Chief Executive
Officer. In July 1995, the Company changed its name to Dynamex Inc. At the time
of its acquisition by the Company, Dynamex Express had developed a national
network of 20 locations across Canada and offered an array of services on a
national, multi-city and local basis. The Company seeks to expand its operations
by implementing and expanding upon the business strategy utilized by Dynamex
Express. In December 1995, the Company acquired the ground courier operations of
Mayne Nickless which had operations in eight U.S. cities and two Canadian
cities. The Company has entered into agreements pursuant to which it will
purchase same-day delivery businesses in New York, New York; Columbus, Ohio;
Chicago, Illinois; Halifax, Nova Scotia; and Winnipeg, Manitoba on or before the
completion of the Offering (collectively, the "Acquisitions"). See
"Business -- Pending Acquisitions."
THE OFFERING
<TABLE>
<S> <C>
Shares Offered by the Company................ 3,100,000
Shares to be Outstanding after the
Offering................................... 6,309,630(1)
Use of Proceeds.............................. To repay substantially all outstanding
indebtedness and to pay a portion of the
consideration for the Acquisitions. See "Use
of Proceeds."
Proposed Nasdaq National Market Symbol....... DYMX
</TABLE>
- ---------------
(1) Excludes 473,384 additional shares of Common Stock reserved for issuance
under the Company's Stock Option Plan, of which 214,384 shares of Common
Stock are issuable upon the exercise of stock options outstanding at a
weighted average exercise price of $3.84 per share and 259,000 shares of
Common Stock which will be issuable upon the exercise of stock options to be
granted in connection with the Offering at an exercise price per share equal
to the initial public offering price. Includes 126,170 shares of Common
Stock to be issued in connection with the Acquisitions (assuming an initial
public offering price of $11.00 per share) and 540,000 shares of Common
Stock to be issued upon the mandatory exercise of the Bridge Warrants at the
time of the Offering. See "Use of Proceeds" and "Management -- Stock Option
Plan."
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective purchasers of the shares of Common Stock offered
hereby.
4
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, NINE MONTHS ENDED APRIL 30,
--------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
1993 1994 1995(1) 1995(2) 1995 1996(1) 1996(2)
------- ------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales.............................. $ 728 $ 7,023 $21,032 $ 99,506 $11,350 $50,015 $ 77,243
Gross profit....................... 309 1,811 6,696 34,004 3,545 14,936 25,619
Operating income (loss)............ (497) (960) (1,062) 3,502 (1,191) 1,479 3,154
Interest expense................... 25 157 403 2,010 240 1,079 1,673
Income (loss) before taxes......... (508) (1,065) (1,622) 1,672 (1,431) 400 1,604
Income taxes....................... -- -- 3 751 -- 11 716
Net income (loss).................. (508) (1,065) (1,625) 921 (1,431) 389 888
Net income (loss) per common
share(3)......................... $ (0.33) $ (0.63) $(0.81) $ 0.22 $(0.85) $ 0.10 $ 0.21
Weighted average common shares
outstanding...................... 1,556 1,691 2,018 4,258 1,679 3,706 4,258
OTHER DATA:
Earnings (loss) before interest,
taxes, depreciation and
amortization(4).................. $ (429) $ (586) $ (529) $ 5,994 $ (682) $2,545 $ 5,100
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996,
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(5)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................................ $ 3,300 $ 8,325
Total assets........................................................................... 32,987 45,409
Long-term debt, excluding current portion.............................................. 18,866 168
Shareholders' equity................................................................... 5,658 37,377
</TABLE>
- ---------------
(1) The historical statement of operations data for the year ended July 31, 1995
and for the nine months ended April 30, 1996 include data for (i) Dynamex
Express after May 31, 1995, the effective date of its acquisition by the
Company and (ii) Mayne Nickless after December 28, 1995, the effective date
of its acquisition by the Company.
(2) The pro forma statement of operations data for the year ended July 31, 1995
have been prepared as if the acquisition of Dynamex Express, Mayne Nickless
and the Acquired Companies occurred at the beginning of that period and for
the nine months ended April 30, 1996 as if the acquisition of Mayne Nickless
and the Acquired Companies occurred at the beginning of that period.
(3) See Note 1 of Notes to the Consolidated Financial Statements.
(4) EBITDA is defined as income excluding interest, taxes, depreciation and
amortization of goodwill and other intangible assets (as presented on the
face of the income statement). EBITDA is supplementally presented because
management believes that it is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness, maintain current
operating levels of fixed assets and acquire additional operations and
businesses. EBITDA should not be considered as a substitute for the
statement of operations or cash flow data from the Company's financial
statements, which have been prepared in accordance with generally accepted
accounting principles. Cash flows provided by (used in) operating
activities for the three years ended July 31, 1995 and for the nine months
ended April 30, 1995 and 1996 were ($636), ($980), ($944), $335 and $1,838,
respectively. Cash flows used in investing activities for the three years
ended July 31, 1995 and for the nine months ended April 30, 1995 and 1996
were $387, $2,251, $7,995, $194 and $12,724, respectively. Cash flows
provided by (used in) financing activities for the three years ended July
31, 1995 and for the nine months ended April 30, 1995 and 1996 were $624,
$3,964, $8,580, ($944) and $10,896, respectively.
(5) The pro forma as adjusted balance sheet data have been prepared as if the
Acquisitions and the Offering had occurred as of April 30, 1996 and reflect
the issuance of the shares offered by the Company hereby, the application
by the Company of the net proceeds therefrom, the issuance of shares in
connection with the Acquisitions and the mandatory exercise of the Bridge
Warrants at the time of the Offering. See "Use of Proceeds."
The principal executive offices of the Company are located at 2630 Skymark
Avenue, Suite 610, Mississauga, Ontario L4W 5A4 and its telephone number is
(905) 238-6414. The Company intends to move its principal executive offices to
Dallas, Texas within the next 18 months.
5
<PAGE> 8
RISK FACTORS
Prospective investors should carefully review the following risk factors
together with the other information in this Prospectus in evaluating the Company
and its business prior to purchasing the Common Stock offered by this
Prospectus.
ACQUISITION STRATEGY; POSSIBLE NEED FOR ADDITIONAL FINANCING
In order to expand its network of facilities, the Company plans to acquire
local delivery businesses in new geographic regions and in the metropolitan
areas where the Company currently operates. Due to consolidation within the
same-day delivery and logistics industry, there is significant competition in
acquiring such businesses. There can be no assurance that the Company will be
able to acquire or profitably manage additional companies or successfully
integrate their operations into the Company. In addition, there can be no
assurance that companies acquired in the future either will be beneficial to the
successful implementation of the Company's overall strategy or will ultimately
produce returns that justify the investment therein, or that the Company will be
successful in achieving meaningful economies of scale through the acquisition
thereof. See "Business -- Business Strategy" and "-- Pending Acquisitions."
The Company's acquisition strategy may require the Company to incur
additional debt in the future, may result in potentially dilutive issuances of
securities and may result in increased goodwill, intangible assets and
amortization expense. There can be no assurance that the Company's primary
lender will consent to acquisitions above a certain annual dollar threshold set
forth in the Company's credit facility or that, if additional financing is
necessary, it can be obtained on terms the Company deems acceptable. As a
result, the Company might be unable to successfully implement its acquisition
strategy. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
LIMITED COMBINED OPERATING HISTORY; HISTORY OF LOSSES
Recent acquisitions have greatly expanded the size and scope of the
operations of the Company. Additionally, the Company proposes to complete the
Acquisitions simultaneously with the closing of the Offering. The process of
integrating acquired businesses often involves unforeseen difficulties and may
require a disproportionate amount of the Company's financial and other
resources, including management time. There can be no assurance that the Company
will be able to profitably manage recently acquired companies or successfully
integrate their operations into the Company. For the years ended July 31, 1993,
1994, and 1995, the Company incurred actual net losses of approximately
$508,000, $1.1 million and $1.6 million, respectively. No assurances can be
given that the Company will operate profitably in the future. As of April 30,
1996, the Company had an accumulated deficit of approximately $3.7 million. See
"Selected Consolidated Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
COMPETITION
The market for same-day delivery and logistics services has been and is
expected to remain highly competitive. Competition is often intense,
particularly for basic delivery services. The industry is highly fragmented with
low barriers to entry, and there is a recent trend toward consolidation. Other
companies in the industry compete with the Company not only for provision of
services but also for acquisition candidates. Some of these companies have
longer operating histories and greater financial and other resources than the
Company. Additionally, companies that do not currently operate delivery and
logistics businesses may enter the industry in the future. See
"Business -- Competition."
CLAIMS EXPOSURE
The Company utilizes the services of approximately 2,300 drivers, and from
time to time such drivers are involved in accidents or other activities that may
give rise to liability claims. The Company currently carries liability insurance
with an aggregate limit of $15.0 million, and independent owner/operators are
required to maintain liability insurance of at least the minimum amounts
required by applicable state or provincial law.
6
<PAGE> 9
The Company also has insurance policies covering property and fiduciary trust
liability, which coverage includes all drivers. There can be no assurance that
claims against the Company, whether under the liability insurance or the surety
bonds, will not exceed the applicable amount of coverage, that the Company's
insurer will be solvent at the time of settlement of an insured claim, or that
the Company will be able to obtain insurance at acceptable levels and costs in
the future. In addition, the Company's increased visibility and financial
strength as a public company may create additional claims exposure. If the
Company were to experience a material increase in the frequency or severity of
accidents, liability claims, workers' compensation claims, or unfavorable
resolutions of claims, the Company's business, financial condition and results
of operations could be materially and adversely affected. In addition,
significant increases in insurance costs could adversely affect the Company's
profitability. See "Business -- Safety."
CERTAIN TAX MATTERS RELATED TO DRIVERS
The Company uses independent owner/operators as drivers in a significant
portion of its operations. As of April 30, 1996, approximately 83% of the
Company's drivers were independent owner/operators. From time to time, taxing
authorities in the U.S. and Canada have sought to assert that independent
owner/operators in the transportation industry, including those utilized by the
Company, are employees rather than independent contractors. The Company believes
that the independent owner/operators utilized by the Company are not employees
under existing interpretations of federal (U.S. and Canadian), state and
provincial laws. However, there can be no assurance that federal, state or
provincial authorities will not challenge this position, or that other laws or
regulations, including tax laws, or interpretations thereof, will not change.
If, as a result of any of the foregoing, the Company is required to pay for and
administer added benefits to independent owner/operators, the Company's
operating costs would increase. Additionally, if the Company is required to pay
back-up withholding with respect to amounts previously paid to such persons, it
may be required to pay penalties which could have a material adverse impact on
the Company's financial condition and results of operations. See
"Business -- Services" and "-- Employees."
In addition, certain of the Company's drivers are employed by the Company
and own and operate the vehicles used during the course of their employment. The
Company reimburses these employees for all or a portion of the operating costs
of those vehicles. The Company believes that these reimbursement arrangements do
not represent additional compensation to those employees. However, there can be
no assurance that federal (U.S. and Canadian), state or provincial taxing
authorities will not seek to recharacterize some or all of such payments as
additional compensation. If such amounts were so recharacterized, the Company
would have to pay additional employment related taxes on such amounts.
FOREIGN EXCHANGE
A significant portion of the Company's operations are conducted in Canada.
Exchange rate fluctuations between the U.S. and Canadian dollar result in
fluctuations in the amounts relating to the Canadian operations reported in the
Company's consolidated financial statements. The Company historically has not
entered into hedging transactions with respect to its foreign currency exposure.
There can be no assurance that fluctuations in foreign currency exchange rates
will not have a material adverse effect on the Company's business, financial
condition or results of operations. See Note 8 of Notes to the Consolidated
Financial Statements.
PERMITS AND LICENSING
Although recent legislation has significantly deregulated certain aspects
of the transportation industry, the Company's delivery operations are still
subject to various federal, state, provincial and local laws, ordinances and
regulations that in many instances require certificates, permits and licenses.
Failure by the Company to maintain required certificates, permits or licenses,
or to comply with applicable laws, ordinances or regulations could result in
substantial fines or possible revocation of the Company's authority to conduct
certain of its operations. Delays in obtaining approvals for the transfer or
grant of certificates, permits or licenses, or failure to obtain same, could
impede the implementation of the Company's acquisition program. See "Business --
Regulation."
7
<PAGE> 10
DEPENDENCE ON KEY PERSONNEL
The Company's success is largely dependent on the skills, experience and
performance of certain key members of its management, including particularly
Richard K. McClelland, the Company's Chief Executive Officer. The loss of the
services of any of these key employees could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company has entered into an employment contract with Mr. McClelland. The
Company's future success and plans for growth also depend on its ability to
attract, train and retain skilled personnel in all areas of its business. There
is strong competition for skilled personnel in the same-day delivery and
logistics business. See "Management."
EFFECTIVE CONTROL BY CYPRESS CAPITAL PARTNERS I, L.P. AND AFFILIATES
Upon completion of the Offering, Cypress Capital Partners I, L.P., a
Dallas-based private investment partnership ("Cypress"), and certain of its
affiliates, including James M. Hoak, the sole stockholder of the general partner
of Cypress, will directly and indirectly own an aggregate of 2,356,552 shares of
Common Stock, or approximately 37% of the total voting power of the Company (or
35% of the total voting power of the Company if the over-allotment option is
exercised in full). Accordingly, Cypress and its affiliates will be in a
position to exercise substantial influence over actions that require consent of
stockholders, including decisions relating to the election of directors of the
Company, mergers and consolidations. See "Principal Stockholders," "Certain
Transactions" and "Underwriting."
TECHNOLOGY
Technological advances in the nature of facsimile and electronic mail have
affected the market for on-demand document delivery services. While these
technological developments have not had a significant adverse impact on the
Company's business to date, and although the Company has shifted its focus to
the distribution of non-faxable items and logistics services, there can be no
assurance that these or other technologies will not have a material adverse
effect on the Company's business, financial condition and results of operations
in the future.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
6,309,630 shares of Common Stock. As part of the consideration for the
Acquisitions, the Company has agreed to issue to certain owners of the Acquired
Companies an aggregate of 126,170 shares of Common Stock (assuming an initial
public offering price of $11.00 per share) and has agreed to register such
shares under the Securities Act of 1933, as amended (the "Securities Act"),
within 30 days after the closing of the Acquisitions in order to permit the
resale of such shares in the open market from time to time, subject to the
lockup period described below. The Company has agreed to maintain the
effectiveness of such registration for two years. In addition, 3,083,460 shares
previously issued by the Company (including 540,000 shares to be issued upon the
mandatory exercise of the Bridge Warrants) will be eligible for resale after the
Offering subject to the provisions of Rule 144 under the Securities Act and the
lockup period described below. Further, 473,384 shares of Common Stock will be
issuable upon exercise of outstanding options and options to be granted in
connection with the Offering, 110,754 of which are immediately exercisable
(subject to the lockup period described below which affects 105,954 of such
shares) and 362,630 of which vest over a five-year period. The Company, the
Company's executive officers and directors, previous owners of the companies to
be acquired in the Acquisitions to whom shares of Common Stock are being issued
in connection therewith and stockholders of the Company that own 1% or more of
the Common Stock outstanding prior to the Offering have agreed not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or any
securities exercisable for or convertible into Common Stock for a period of 180
days after the date of this Prospectus without the prior written consent of
William Blair & Company, L.L.C. Pursuant to a registration rights agreement with
the Company, Cypress may require the Company after the six month anniversary of
the Offering to file a registration statement under the Securities Act with
respect to its shares of Common Stock, and subject to certain limitations,
certain other principal stockholders of the Company are entitled to include
their shares of Common Stock therein.
8
<PAGE> 11
No predictions can be made as to the effect, if any, that market sales of
such shares will have on the market price of shares of Common Stock prevailing
from time to time. However, sales of substantial amounts of Common Stock in the
open market or the availability of such shares for sale following the Offering
could adversely affect the market price for the Common Stock. See "Shares
Eligible for Future Sale," "Description of Capital Stock" and "Principal
Stockholders."
ABSENCE OF PREVIOUS MARKET
Prior to the Offering, there has been no public market for any class of
stock of the Company. Consequently, the initial public offering price has been
determined by negotiations among the Company and the Representatives of the
Underwriters and may not necessarily be indicative of the market price of the
Common Stock after the Offering. No assurance can be given that an active public
trading market for the Common Stock will develop or be sustained, or as to the
price at which the Common Stock will trade if and when it is issued. See
"Underwriting."
POSSIBLE VOLATILITY OF STOCK PRICE
Prices for the Common Stock will be determined in the marketplace and may
be influenced by many factors, including the depth and liquidity of the market
for the Common Stock, investor perception of the Company, and general economic
and market conditions. Variations in the Company's operating results, general
trends in the industry and other factors could cause the market price of the
Common Stock to fluctuate significantly. In addition, general trends and
developments in the industry, government regulation and other factors could have
a significant impact on the price of the Common Stock. The stock market has, on
occasion, experienced extreme price and volume fluctuations that have often
particularly affected market prices for smaller companies and that often have
been unrelated or disproportionate to the operating performance of the affected
companies, and the price of the Common Stock could be affected by such
fluctuations.
DILUTION
Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the net tangible book value per share of Common Stock of
$8.92 (assuming an initial public offering price of $11.00 per share). See
"Dilution."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation"), the Company's Bylaws (the
"Bylaws") and the Rights Agreement between the Company and Harris Trust and
Savings Bank (the "Rights Agreement") may delay, defer, discourage or prevent a
merger, proxy contest, tender offer or takeover attempt that a stockholder might
consider to be in such stockholder's best interest, including attempts that
might result in a premium over the market price for the shares held by
stockholders.
The Bylaws provide that the number of directors shall be fixed, from time
to time, by resolution of the Board of Directors of the Company. Neither the
Bylaws nor the Restated Certificate of Incorporation permit stockholders to call
special meetings or to take actions by written consent in lieu of a meeting,
unless such action and the taking of such action by written consent have been
approved in advance by the Board of Directors. The Restated Certificate of
Incorporation provides that the Board of Directors may amend the Bylaws, subject
to the rights of the stockholders to amend such Bylaws. An amendment to the
provision of the Restated Certificate of Incorporation which prohibits action by
stockholders by written consent in lieu of a meeting requires the affirmative
vote of two-thirds of the Company's capital stock then outstanding. Pursuant to
the Restated Certificate of Incorporation, additional shares of Common Stock may
be issued in the future without further stockholder approval. Furthermore, the
Restated Certificate of Incorporation permits the Board of Directors to
establish by resolution one or more series of preferred stock ("Preferred
Stock") and to establish the powers, designations, preferences and relative,
participating, optional or other special rights of
9
<PAGE> 12
each series of Preferred Stock. The Preferred Stock could be issued on terms
that are unfavorable to the holders of Common Stock or that could make a
takeover or change in control of the Company more difficult.
In June 1996, the Board of Directors of the Company approved the Rights
Agreement which is designed to protect stockholders should the Company become a
target of coercive and unfair takeover tactics but may discourage takeover
attempts that are not approved by the Board of Directors. The Rights could cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on redemption of the Rights or on substantially
all of the Rights also being acquired. In addition, immediately following the
Offering, the Company will be subject to Section 203 of the Delaware General
Corporation Law, which places restrictions on certain business combinations with
certain stockholders that could render more difficult a change in control of the
Company. See "Description of Capital Stock."
NO DIVIDENDS
The Company has not declared or paid any cash dividends on its Common Stock
since its inception. The Company currently intends to retain all earnings for
the operation and expansion of its business and does not anticipate paying any
dividends in the foreseeable future. In addition, the Company's credit agreement
restricts the payment of dividends. See "Dividend Policy" and Note 5 of Notes to
the Consolidated Financial Statements.
10
<PAGE> 13
THE COMPANY
History. The Company was founded in 1992 as Parcelway Systems Holding Corp.
In November 1993, Cypress acquired a controlling interest in the Company with
the purpose of building a national same-day delivery and logistics company.
During 1993 and 1994, the Company completed acquisitions of same-day delivery
companies with operations in Phoenix, Arizona; Chicago, Illinois; Los Angeles,
California; and Western Canada. In May 1995, the Company acquired Dynamex
Express and subsequently changed the Company's name to Dynamex Inc. At the time
of its acquisition, Dynamex Express had developed a national network of same-day
delivery and logistics services in Canada and had operations in 20 Canadian
cities. In December 1995, the Company significantly expanded the scope of its
U.S. operations by acquiring the same-day, on-demand delivery business of Mayne
Nickless which had facilities in eight major metropolitan areas in the U.S. and
two metropolitan areas in Canada.
Pending Acquisitions. The Company has entered into agreements
(collectively, the "Acquisition Agreements"), pursuant to which it will
purchase, on or before the completion of the Offering, the same-day delivery
businesses of (i) Action Delivery and Messenger Service Limited ("Action
Delivery"), (ii) Seidel Enterprises, Inc. and a related company (together,
"Seidel Delivery"), (iii) Seko Enterprises, Inc. and related companies
(together, "Seko/Metro"), (iv) Southbank Courier, Inc. ("Southbank") and (v)
Zipper Transportation Services, Ltd. ("Zipper"; and collectively with Action
Delivery, Seidel Delivery, Southbank and Seko/Metro, the "Acquired Companies").
As consideration for the stock of the Acquired Companies, the stockholders of
the Acquired Companies will receive an aggregate of approximately $7.2 million
in cash and approximately 126,170 shares of Common Stock (assuming an initial
public offering price of $11.00 per share) and the Company will repay an
aggregate amount of approximately $840,000 of the Acquired Companies'
indebtedness.
Certain information regarding each of the Acquired Companies is summarized
below:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
YEAR DECEMBER 31, 1995 METROPOLITAN
ACQUIRED COMPANY ESTABLISHED SALES AREAS SERVED
- ---------------- ----------- ------------------- -------------------
<S> <C> <C> <C>
Halifax, Nova
Action Delivery 1973 $ 2.3 million(1) Scotia
Seidel Delivery 1988 1.8 million Columbus, Ohio
Seko/Metro 1954 8.5 million Chicago, Illinois
Southbank 1992 2.0 million New York, New York
Zipper 1974 6.3 million(1) Winnipeg, Manitoba
-------------
$20.9 million
</TABLE>
- ---------------
(1) Amounts have been converted from Canadian dollars to U.S. dollars using an
exchange rate of 0.73 U.S. dollars to 1.00 Canadian dollars.
11
<PAGE> 14
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of 3,100,000
shares of Common Stock in the Offering are estimated to be approximately $30.9
million (assuming an initial public offering price of $11.00 per share) and
after deducting the underwriting discount and estimated offering expenses.
The Company will apply approximately $8.4 million of the net proceeds of
the Offering to pay (i) the cash portion of the consideration payable in
connection with the Acquisitions, including repayment of assumed debt of
$840,000 and (ii) the estimated transaction costs to effect the Acquisitions of
$400,000. See "Business -- Pending Acquisitions" and "Pro Forma Financial
Information."
The Company will apply approximately $19.9 million of the net proceeds of
the Offering to repay indebtedness outstanding as of June 30, 1996 of (i) term
bank indebtedness (approximately $13.0 million principal amount), (ii)
indebtedness to Air Canada (approximately Cdn $3.2 million principal amount
(approximately $2.4 million, as converted using an exchange rate of 0.73 U.S.
dollars to 1.00 Canadian dollars)), and (iii) indebtedness under the Bridge
Notes, as defined below ($4.5 million principal amount). The Company's bank
indebtedness was incurred under a Credit Agreement, dated as of December 15,
1995 (as amended and restated, the "Credit Agreement"), and bears interest at a
variable rate (9.5% as of June 30, 1996). Such indebtedness, the substantial
portion of which matures in installments through March 2001, was incurred
principally for the purpose of providing financing for the acquisition of Mayne
Nickless and refinancing the indebtedness incurred by the Company in its prior
acquisitions. The Company's indebtedness to Air Canada is due on March 28, 2002
and bears interest at an annual rate of 10%. This indebtedness was incurred in
connection with the Company's acquisition of Dynamex Express and was refinanced
in connection with the Company's acquisition of Mayne Nickless. The bridge
facility consists of $4.5 million (approximately $3.9 million carrying value) of
junior subordinated debentures (the "Bridge Notes") due June 28, 2001, bearing
interest at an initial annual rate of 12%, and related warrants (the "Bridge
Warrants") to purchase 540,000 shares of Common Stock at $.025 per share which
are mandatorily exercisable upon the completion of the Offering. The Bridge
Notes and Bridge Warrants were purchased by Cypress, various limited partners of
Cypress and certain affiliates of Cypress' general partner in connection with
the acquisition of Mayne Nickless. See Note 5 of Notes to the Consolidated
Financial Statements and "Certain Transactions."
The remaining balance of the net proceeds of the Offering (approximately
$2.6 million) will be used to reduce the revolving note under the Credit
Agreement (approximately $1.1 million principal amount which bears interest at a
variable rate, 9.25% as of June 30, 1996) and for general corporate purposes,
including working capital and potential future acquisitions. While the Company
does not have any commitments with respect to any future acquisitions other than
the Acquisitions, the Company is in the process of evaluating and holding
preliminary discussions with potential acquisition candidates in conjunction
with its acquisition program.
Pending the uses set forth above, the net proceeds of the Offering will be
invested in short-term, interest bearing, investment-grade securities.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common Stock
since its inception. The Company currently intends to retain all earnings for
the operation and expansion of its business and does not anticipate paying any
dividends in the foreseeable future. In addition, the Credit Agreement restricts
the payment of dividends. See Note 5 of Notes to the Consolidated Financial
Statements.
12
<PAGE> 15
CAPITALIZATION
The following table sets forth the consolidated current portion of
long-term debt and capitalization of the Company (i) as of April 30, 1996 and
(ii) after giving pro forma effect to the consummation of the Acquisitions and
the issuance of 126,170 shares of Common Stock in connection therewith (assuming
an initial public offering price of $11.00 per share), as adjusted to reflect
(a) the sale by the Company of 3,100,000 shares of Common Stock offered hereby
at an assumed initial public offering price of $11.00 per share (after deduction
of the underwriting discount and estimated offering expenses) and the
application of the net proceeds therefrom as described under "Use of Proceeds"
and (b) the Company's issuance of 540,000 shares of Common Stock upon the
mandatory exercise of the Bridge Warrants. This table should be read in
conjunction with the pro forma financial information and the Company's financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
APRIL 30, 1996
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt.............................. $ 2,044 $ 144
======= =======
Long-term debt and capital leases, excluding current portion... $18,866 $ 168
------- -------
Shareholders' equity:
Preferred Stock, $.01 par value 10,000,000 shares authorized,
no shares issued.......................................... -- --
Warrants to purchase Common Stock............................ 624 --
Common Stock, $.01 par value, 50,000,000 shares authorized;
2,543,460 shares issued, 6,309,630 shares issued pro forma
as adjusted(1)............................................ 25 63
Additional paid-in capital................................... 8,756 41,657
Accumulated deficit(2)....................................... (3,749) (4,345)
Unrealized foreign currency translation adjustment........... 2 2
------- -------
Total shareholders' equity................................ 5,658 37,377
------- -------
Total capitalization................................. $24,524 $37,544
======= =======
</TABLE>
- ---------------
(1) Excludes 473,384 additional shares of Common Stock reserved for issuance
under the Company's Stock Option Plan, of which 214,384 shares of Common
Stock are issuable upon exercise of stock options outstanding at a weighted
average exercise price of $3.84 per share and 259,000 shares of Common
Stock which will be issuable upon exercise of stock options to be granted
in connection with the Offering at an exercise price per share equal to the
initial public offering price.
(2) The Company will incur an extraordinary loss in connection with the
redemption of the Bridge Notes in the amount of the difference between the
carrying value and the principal amount of the Bridge Notes as of April 30,
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
13
<PAGE> 16
DILUTION
The net tangible book value of the Company's Common Stock as of April 30,
1996 was a deficit of approximately $12.2 million, or approximately $4.80 per
share, based upon 2,543,460 shares of Common Stock outstanding at such date.
"Pro forma, as adjusted net tangible book value per share" is determined by
dividing the pro forma, as adjusted net tangible book value by the number of
shares of Common Stock assumed to be outstanding. After giving effect to (i) the
mandatory exercise of the Bridge Warrants, (ii) the completion of the
Acquisitions, including the issuance of 126,170 shares (at an assumed initial
public offering price of $11.00 per share) as partial consideration therefor,
and (iii) the sale by the Company in the Offering of 3,100,000 shares of Common
Stock at an assumed initial public offering price of $11.00 per share (resulting
in net proceeds of approximately $30.9 million after deducting the underwriting
discount and estimated expenses of the Offering) the pro forma, as adjusted, net
tangible book value of the Company as of April 30, 1996 would have been
approximately $13.1 million, or approximately $2.08 per share. This represents
an immediate dilution of $8.92 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $11.00
------
Net tangible book value deficit per share........................ $(4.80)
Increase per share attributable to the Acquisitions.............. 0.38
Decrease per share attributable to the exercise of the Bridge
Warrants...................................................... (0.19)
Increase per share attributable to the Offering.................. 6.69
------
Pro forma, as adjusted net tangible book value per share after the
Offering......................................................... 2.08
------
Dilution per share to new investors................................ $ 8.92
======
</TABLE>
The following table summarizes on a pro forma, as adjusted basis as of
April 30, 1996 the total number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders (giving effect to the adjustments as set forth above) and
by the new investors who purchase shares of Common Stock pursuant to the
Offering at an assumed initial public offering price of $11.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........ 3,209,630 50.9% $10,806,000 24.1% $ 3.37
New investors................... 3,100,000 49.1 34,100,000 75.9 11.00
--------- ----- ----------- -----
Total................. 6,309,630 100.0% $44,906,000 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Excludes 473,384 additional shares of Common Stock reserved for issuance
under the Company's Stock Option Plan, of which 214,384 shares of Common
Stock are issuable upon exercise of stock options outstanding at a weighted
average exercise price of $3.84 per share and 259,000 shares of Common
Stock which will be issuable upon exercise of stock options to be granted
in connection with the Offering at an exercise price per share equal to the
initial public offering price. Includes 126,170 shares of Common Stock to
be issued in connection with the Acquisitions and 540,000 shares of Common
Stock to be issued upon the mandatory exercise of the Bridge Warrants upon
the completion of the Offering. See "Use of Proceeds" and
"Management -- Stock Option Plan."
14
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical financial data for the three years ended
July 31, 1995 and the nine months ended April 30, 1996 have been derived from
the audited consolidated financial statements of the Company appearing elsewhere
herein. The following selected historical financial data for the year ended July
31, 1992 have been derived from the consolidated financial statements of the
Company not appearing elsewhere herein. The selected historical financial data
for the nine months ended April 30, 1995, have been derived from the unaudited
consolidated financial statements, appearing elsewhere herein. The unaudited
consolidated financial statements, in the opinion of management, include all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the results of operations for
that period. Operating results for the nine months ended April 30, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending July 31, 1996. The following selected pro forma financial data for
the year ended July 31, 1995, for the nine months ended April 30, 1996, and as
adjusted as of April 30, 1996 have been derived from the unaudited pro forma
financial information appearing elsewhere herein. The selected financial data
are qualified in their entirety, and should be read in conjunction with, the
Company's financial statements, including the notes thereto, "Pro Forma
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, NINE MONTHS ENDED APRIL 30,
---------------------------------------------------- -------------------------------
PRO FORMA PRO FORMA
1992(1) 1993 1994 1995(2) 1995(3) 1995 1996(2) 1996(3)
------- ------ ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................. $ 219 $ 728 $ 7,023 $21,032 $99,506 $11,350 $50,015 $77,243
Cost of sales......................... 148 419 5,212 14,336 65,502 7,805 35,079 51,624
------ ------ ------- ------- ------- ------- ------- -------
Gross profit........................ 71 309 1,811 6,696 34,004 3,545 14,936 25,619
Selling, general and administrative
expenses............................ 226 752 2,449 7,068 28,190 4,227 12,391 20,642
Depreciation and amortization......... 25 54 322 690 2,312 509 1,066 1,823
------ ------ ------- ------- ------- ------- ------- -------
Operating income (loss)............. (180) (497) (960) (1,062) 3,502 (1,191) 1,479 3,154
Interest expense...................... 16 25 157 403 2,010 240 1,079 1,673
Other (income) expense................ (5) (14) (52) 157 (180) -- -- (123)
------ ------ ------- ------- ------- ------- ------- -------
Income (loss) before taxes.......... (191) (508) (1,065) (1,622) 1,672 (1,431) 400 1,604
Income taxes.......................... -- -- -- 3 751 -- 11 716
------ ------ ------- ------- ------- ------- ------- -------
Net income (loss)................... $ (191) $ (508) $(1,065) $(1,625) $ 921 $(1,431) $ 389 $ 888
====== ====== ======= ======= ======= ======= ======= =======
Net income (loss) per common
share(4)............................ $(0.12) $(0.33) $ (0.63) $(0.81) $ 0.22 $(0.85) $ 0.10 $ 0.21
====== ====== ======= ======= ======= ======= ======= =======
Weighted average common shares
outstanding......................... 1,556 1,556 1,691 2,018 4,258 1,679 3,706 4,258
====== ====== ======= ======= ======= ======= ======= =======
OTHER DATA:
Earnings (loss) before interest,
taxes, depreciation and
amortization(5)..................... $ (150) $ (429) $ (586) $ (529) $ 5,994 $ (682) $ 2,545 $ 5,100
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996
JULY 31, -------------------------
----------------------------------- PRO FORMA
1992 1993 1994 1995 ACTUAL AS ADJUSTED(6)
---- ------ ------ ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................. $380 $ 36 $ 638 $ 1,484 $ 3,300 $ 8,325
Total assets................................................. 599 1,286 8,134 17,194 32,987 45,409
Long-term debt, excluding current portion.................... -- 1,037 1,999 5,924 18,866 168
Shareholders' equity (deficit)............................... 410 (106) 3,389 4,650 5,658 37,377
</TABLE>
- ---------------
(1) Represents results for the fourteen months ended July 31, 1992. The
Company's predecessors began operations in June 1991.
(2) The historical statement of operations data for the year ended July 31, 1995
and for the nine months ended April 30, 1996 include data for (i) Dynamex
Express after May 31, 1995, the effective date of its acquisition by the
Company and (ii) Mayne Nickless after December 28, 1995, the effective date
of its acquisition by the Company.
(3) The pro forma statement of operations data for the year ended July 31, 1995
have been prepared as if the acquisition of Dynamex Express, Mayne Nickless
and the Acquired Companies occurred at the beginning of that period and for
the nine months ended April 30, 1996 as if the acquisition of Mayne Nickless
and the Acquired Companies occurred at the beginning of that period.
(4) See Note 1 of Notes to the Consolidated Financial Statements.
(5) EBITDA is defined as income excluding interest, taxes, depreciation and
amortization of goodwill and other assets (as presented on the face of the
income statement). EBITDA is supplementally presented because management
believes that it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness, maintain current operating
levels of fixed assets and acquire additional operations and businesses.
EBITDA should not be considered as a substitute for statement of operations
or cash flow data from the Company's financial statements, which have been
prepared in accordance with generally accepted accounting principles. Cash
flows provided by (used in) operating activities for the three years ended
July 31, 1995 and for the nine months ended April 30, 1995 and 1996 were
($636), ($980), ($944), $335 and $1,838, respectively. Cash flows used in
investing activities for the three years ended July 31, 1995 and for the
nine months ended April 30, 1995 and 1996 were $387, $2,251, $7,995, $194
and $12,724, respectively. Cash flows provided by (used in) financing
activities for the three years ended July 31, 1995 and for the nine months
ended April 30, 1995 and 1996 were $624, $3,964, $8,580, ($944) and $10,896,
respectively.
(6) The pro forma as adjusted balance sheet data have been prepared as if the
Acquisitions and the Offering had occurred as of April 30, 1996 and reflect
the issuance of the shares offered by the Company hereby, the application by
the Company of the net proceeds therefrom, the issuance of shares in
connection with the Acquisitions and the mandatory exercise of the Bridge
Warrants at the time of the Offering. See "Use of Proceeds."
15
<PAGE> 18
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated condensed financial
information consists of an Unaudited Pro Forma Consolidated Condensed Balance
Sheet as of April 30, 1996 and the Unaudited Pro Forma Consolidated Condensed
Statements of Operations for the year ended July 31, 1995 and the nine months
ended April 30, 1996 (collectively the "Pro Forma Statements"). The Unaudited
Pro Forma Consolidated Condensed Balance Sheet as of April 30, 1996 gives effect
to the Acquisitions as if they had occurred on April 30, 1996, including the
issuance of 126,170 shares of Common Stock to the previous owners of the
Acquired Companies and the issuance of 825,000 shares of Common Stock pursuant
to the Offering (which amount is sufficient to fund the cash portion of the
purchase price, including costs related thereto, of $8.4 million). The Unaudited
Pro Forma As Adjusted Consolidated Condensed Balance Sheet as of April 30, 1996
gives additional effect to the issuance of the balance of shares of Common Stock
being issued in connection with the Offering, the application of the proceeds
thereof and the mandatory exercise of the Bridge Warrants simultaneously
therewith. The Unaudited Pro Forma Consolidated Condensed Statements of
Operations give effect to the acquisitions of Dynamex Express, Mayne Nickless
and the Acquired Companies, including the issuance of 126,170 and 825,000 shares
of Common Stock as described above, as if all such acquisitions had occurred as
of the beginning of those respective periods.
Each of the Acquisitions will be accounted for utilizing the purchase
method of accounting. The purchase price has been allocated in the Pro Forma
Statements to the assets to be acquired and the liabilities to be assumed on a
preliminary basis based on the Company's estimates of their fair values.
Unaudited pro forma adjustments are based upon historical information,
preliminary estimates and certain assumptions that the Company deems
appropriate. The unaudited pro forma condensed financial information presented
herein is not necessarily indicative of the results of the Company that would
have been obtained had such events occurred at the beginning of the period, as
assumed, or of the future results of the Company. The Pro Forma Statements
should be read in conjunction with the other financial statements and notes
thereto appearing elsewhere in this Prospectus.
16
<PAGE> 19
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
APRIL 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUIRED
COMPANIES THE COMPANY
PRO FORMA THE COMPANY PRO FORMA
THE COMPANY COMBINED PRO FORMA PRO FORMA OFFERING AS ADJUSTED
APRIL 30, 1996 MARCH 31, 1996 ADJUSTMENTS APRIL 30, 1996 ADJUSTMENTS APRIL 30, 1996
-------------- -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Cash and temporary
investments................ $ 516 $ 87 $(7,600)(a) $ 603 $ 22,473 (e) $ 1,896
8,440 (c) (21,194)(f)
(840)(d) 14 (g)
Accounts receivable.......... 10,768 2,629 13,397 13,397
Other current assets......... 479 417 896 896
------- ------ ------- ------- -------- -------
11,763 3,133 -- 14,896 1,293 16,189
Furniture, fixtures and
equipment, net............. 1,990 1,463 3,453 3,453
Intangible assets............ 17,867 307 6,091 (b) 24,265 24,265
Other assets................. 1,367 135 1,502 1,502
------- ------ ------- ------- -------- -------
$32,987 $5,038 $ 6,091 $44,116 $ 1,293 $45,409
======= ====== ======= ======= ======== =======
Current liabilities.......... $ 8,463 $1,946 (645)(d) $ 9,764 $ (1,900)(f) $ 7,864
Long-term debt............... 18,866 195 (195)(d) 18,866 (18,698)(f) 168
Shareholders' equity......... 5,658 2,897 8,988 (a) 15,486 22,473 (e) 37,377
(2,897)(b) (596)(f)
840 (c) 14 (g)
------- ------ ------- ------- -------- -------
$32,987 $5,038 $ 6,091 $44,116 $ 1,293 $45,409
======= ====== ======= ======= ======== =======
</TABLE>
The accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial
Statements are an integral part of these statements.
17
<PAGE> 20
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACQUIRED
COMPANIES
DYNAMEX MAYNE PRO FORMA
EXPRESS NICKLESS COMBINED THE COMPANY
THE COMPANY TEN MONTHS FISCAL YEAR TWELVE MONTHS PRO FORMA
YEAR ENDED ENDED ENDED ENDED PRO FORMA YEAR ENDED
JULY 31, 1995 MAY 31, 1995 JULY 2, 1995 JUNE 30, 1995 ADJUSTMENTS JULY 31, 1995
------------- ------------ ------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Sales.......................... $21,032 $ 28,833 $27,922 $ 21,719 $ $99,506
Cost of sales.................. 14,336 20,914 16,433 13,819 65,502
------- -------- ------- -------- -------
Gross profit................. 6,696 7,919 11,489 7,900 34,004
Selling, general and
administrative expenses...... 7,068 6,612 8,946 5,906 (342)(i) 28,190
Depreciation and
amortization................. 690 310 666 277 369 (h) 2,312
------- -------- ------- -------- -------- -------
Operating income (loss)...... (1,062) 997 1,877 1,717 (27) 3,502
Interest expense............... 403 (42) 74 120 1,455 (j) 2,010
Other (income) expense......... 157 (175) -- (162) (180)
------- -------- ------- -------- -------- -------
Income (loss) before income
taxes..................... (1,622) 1,214 1,803 1,759 (1,482) 1,672
Income taxes................... 3 10 -- 78 660 (l) 751
------- -------- ------- -------- -------- -------
Net income (loss)............ $(1,625) $ 1,204 $ 1,803 $ 1,681 $ (2,142) $ 921
======= ======== ======= ======== ======== =======
Net income (loss) per common
share........................ $ (0.81) $ 0.22
======= =======
Weighted average common shares
outstanding.................. 2,018 4,258
======= =======
</TABLE>
The accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial
Statements are an integral part of these statements.
18
<PAGE> 21
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACQUIRED
COMPANIES
MAYNE PRO FORMA THE COMPANY
THE COMPANY NICKLESS COMBINED PRO FORMA
NINE MONTHS SIX MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED PRO FORMA ENDED
APRIL 30, 1996 DECEMBER 31, 1995 MARCH 31, 1995 ADJUSTMENTS APRIL 30, 1996
-------------- ----------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Sales.................... $ 50,015 $14,008 $ 15,287 $(2,067)(k) $ 77,243
Cost of sales............ 35,079 7,985 9,554 (994)(k) 51,624
-------- ------- -------- ------- --------
Gross profit........... 14,936 6,023 5,733 (1,073) 25,619
Selling, general
and administrative
expenses............... 12,391 4,924 4,503 (993)(k) 20,642
(183)(i)
Depreciation and
amortization........... 1,066 312 224 221 (h) 1,823
-------- ------- -------- ------- --------
Operating income
(loss).............. 1,479 787 1,006 (118) 3,154
Interest expense......... 1,079 36 76 482 (j) 1,673
Other (income) expense... -- -- (123) -- (123)
-------- ------- -------- ------- --------
Income (loss) before
income taxes........ 400 751 1,053 (600) 1,604
Income taxes............. 11 -- 45 660 (l) 716
-------- ------- -------- ------- --------
Net income (loss)...... $ 389 $ 751 $ 1,008 $(1,260) $ 888
======== ======= ======== ======= ========
Net income (loss) per
common share........... $ 0.10 $ 0.21
======== ========
Weighted average common
shares outstanding..... 3,706 4,258
======== ========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial
Statements are an integral part of these statements.
19
<PAGE> 22
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
BASIS OF PRESENTATION -- The accompanying Unaudited Pro Forma Consolidated
Condensed Balance Sheet presents the financial condition of the Company as if
the Acquisitions had occurred as of April 30, 1996. The Unaudited Pro Forma As
Adjusted Consolidated Condensed Balance Sheet presents the financial condition
of the Company as if the Acquisitions, the Offering, including the application
of proceeds thereof, and the exercise of the Bridge Warrants had occurred as of
April 30, 1996. The Pro Forma Consolidated Condensed Statement of Operations
presents the results of operations for the nine months ended April 30, 1996 as
if the Acquisitions and the acquisition of Mayne Nickless had occurred at the
beginning of that period. In addition, the Unaudited Pro Forma Consolidated
Condensed Statement of Operations for the year ended July 31, 1995 has been
presented as if the Acquisitions and the acquisition of Mayne Nickless and
Dynamex Express had occurred as of the beginning of that period. Each of these
acquisitions has been accounted for under the purchase method of accounting.
Accordingly, the total purchase price, including transaction costs, has been
allocated to the assets and liabilities of the acquired businesses based on
their estimated fair value.
The Acquisitions are being financed by the issuance of Common Stock to the
sellers and from a portion of the cash proceeds of the Offering. Accordingly,
the pro forma condensed financial statements give effect to the issuance of
126,170 shares of Common Stock to the sellers of the Acquired Companies and
825,000 shares of Common Stock pursuant to the Offering (assuming all such
shares are issued at an initial public offering price of $11.00 per share). The
sale of these shares would result in net proceeds to the Company of
approximately $8.4 million, net of underwriting discount and estimated offering
expenses, which amount equals the sum of (i) the cash portion of the aggregate
purchase price of the Acquisitions, (ii) the aggregate indebtedness of the
Acquired Companies which is to be repaid by the Company upon the closing of the
Acquisitions and (iii) estimated transaction costs related to the Acquisitions.
The Offering will result in the issuance of 3,100,000 shares of Common Stock,
including the 825,000 shares issued to finance the cash portion of the
Acquisitions. This will result in net proceeds to the Company of approximately
$30.9 million (assuming an initial public offering price of $11.00 per share),
after deducting the underwriting discount and estimated offering expenses. These
proceeds will be used to fund the cash portion of the Acquisitions, as described
above, and to repay indebtedness of approximately $21.2 million based on
outstanding principal balances as of April 30, 1996.
AMORTIZATION OF INTANGIBLE ASSETS -- Intangible assets, including goodwill,
are amortized over periods ranging from 5 to 25 years. The weighted average
amortization period for all intangible assets is approximately 20 years.
Adjustments to Pro Forma Condensed Balance Sheet:
(a) To reflect purchase of Acquired Companies.
The Purchase price is comprised of:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash (including transaction costs of $400,000)................. $7,600
Common Stock................................................... 1,388
------
Purchase price................................................. $8,988
======
</TABLE>
(b) To reflect the Acquisitions and to adjust the assets and liabilities of
the Acquired Companies to fair value. The Purchase price of the Acquired
Companies is allocated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Purchase price................................................. $8,988
Net book value of Acquired Companies........................... (2,897)
------
Excess of purchase price over net book value of assets
acquired..................................................... $6,091
======
</TABLE>
20
<PAGE> 23
The assets and liabilities of the Acquired Companies have been recorded at
net book value which is estimated to equal fair value. The excess of the
purchase price over this estimated fair value has been allocated to the
intangible assets acquired, including goodwill (approximately $5,961,000) and
tradenames, agreements not to compete and customer lists (aggregating
approximately $400,000).
(c) To reflect issuance of a portion of 825,000 shares of Common Stock in
the Offering, which amount will result in net proceeds to the Company of
approximately $8.4 million, assuming an initial public offering price of $11.00
per share. A portion of the proceeds of the Offering are to be used for the cash
and transaction cost components of the Acquisition purchase price and to repay
indebtedness of the Acquired Companies (approximately $840,000) in connection
with the Acquisitions, which amounts aggregate $8.4 million.
(d) To reflect repayment of approximately $840,000 of aggregate
indebtedness ($645,000 current portion of long-term and $195,000 long-term) of
the Acquired Companies in connection with the Acquisitions.
Adjustments to Pro Forma As Adjusted Condensed Balance Sheet:
(e) To reflect issuance of the balance of the shares of Common Stock
pursuant to the Offering (2,275,000 shares), assuming an initial public offering
price of $11.00 per share.
(f) To reflect repayment of outstanding debt with principal balance of
approximately $21.2 million (and a carrying value of approximately $20.6 million
which includes approximately $1.9 million current portion of long-term and
approximately $18.7 million long-term) with proceeds from the Offering. The
early retirement of the Bridge Facility, which has a principal balance of $4.5
million and a carrying value of approximately $3.9 million, will result in an
extraordinary loss of $596,000.
(g) To reflect exercise of Bridge Warrants, including receipt of aggregate
exercise price of $13,500.
Adjustments to Pro Forma Condensed Statements of Operations:
(h) To reflect adjustment to depreciation and amortization based upon the
effects of the purchase price allocation as if the acquisitions of Dynamex
Express and Mayne Nickless and the Acquisitions had occurred at the beginning of
the period presented.
(i) To eliminate corporate overhead charges to Mayne Nickless for those
periods prior to its acquisition by the Company. These charges represent an
allocation of general corporate overhead from the former parent of Mayne
Nickless made to allocate all corporate costs to its various operating units.
These charges, which the Company will not incur, were in addition to charges for
specific services and functions provided by the former parent.
(j) To reflect net increase in interest expense as a result of debt
incurred to acquire Dynamex Express and Mayne Nickless.
(k) To eliminate operating results of Mayne Nickless for the month of July
1995. By combining the results of operations of the Company for the nine months
ended April 30, 1996 (which includes the operations of Mayne Nickless for four
months) and the results of operations of Mayne Nickless for the six months ended
December 31, 1995, the combined results of operations for the nine months ended
April 30, 1996 contain the results of Mayne Nickless for ten months.
(l) To reflect adjustment to provision for income taxes.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information
contained in the financial statements, including the notes thereto, and the
other financial information appearing elsewhere in this Prospectus.
GENERAL
The Company had no significant operations prior to the year ended July 31,
1992. Since that date, the Company has completed 10 acquisitions of same-day
courier operations in the U.S. and Canada. Each of these acquisitions has been
accounted for using the purchase method of accounting. Accordingly, the
Company's historical results of operations reflect the results of acquired
operations as of the date of acquisition. The most significant of these
transactions were (i) the acquisition of Dynamex Express in May 1995, pursuant
to which the Company acquired the majority of its Canadian operations and
employed its Chief Executive Officer and certain other key employees, and (ii)
the acquisition of Mayne Nickless in December 1995. The operating results
attributable to the operations of Dynamex Express are included in the Company's
historical results after May 31, 1995, and the operations of Mayne Nickless are
included in the Company's historical results after December 28, 1995.
Consequently, the year ended July 31, 1995 includes Dynamex Express operations
for two months and does not include any operations of Mayne Nickless and the
nine month period ended April 30, 1996 includes nine months of Dynamex Express
operations and four months of Mayne Nickless operations. As a result, the
historical operating results of the Company for a given period are not
necessarily comparable to prior or subsequent periods, and in particular, the
periods prior to the Company's acquisition of Dynamex Express are not
necessarily comparable to the periods subsequent to such acquisition.
Sales consist primarily of charges to customers for individual delivery
services and weekly or monthly charges for recurring services, such as fleet
management. Sales are recognized when the service is performed. The amount of
yield (revenue per transaction) for a particular service is dependent upon a
number of factors including size and weight of articles transported, distance
transported, special handling requirements, requested delivery time and local
market conditions. Generally, articles of greater weight, transported over
longer distances and those that require special handling produce higher yields.
Cost of sales consists of costs relating directly to performance of
services, including driver and messenger costs and third party delivery charges,
if any. The Company almost exclusively utilizes drivers who own their own
vehicles, and approximately 83% of these owner/operators are independent
contractors as opposed to employees of the Company. Drivers and messengers are
generally compensated based on a percentage of the charge for a delivery.
Consequently, the Company's costs directly associated with providing these
services are variable in nature. To the extent that the drivers and messengers
are employees of the Company, employee benefit costs related to them, such as
payroll taxes and insurance, are also included in cost of sales.
Selling, general and administrative expenses include costs incurred at the
branch level related to taking orders, dispatching drivers and messengers, as
well as administrative costs related to such functions. Also included in
selling, general and administrative expenses are regional and corporate level
marketing and administrative costs and occupancy costs related to branch and
corporate locations.
Generally, the Company's on-demand services provide higher gross profit
margins than do scheduled distribution or fleet management services because
driver compensation for on-demand services is generally lower as a percentage of
sales from such service. However, scheduled distribution and fleet management
services generally have fewer administrative requirements related to order
taking, dispatching drivers and billing. As a result of these variances, the
Company's margins are dependent in part on the mix of business for a particular
period.
As the Company has no significant investment in transportation equipment,
depreciation and amortization expense relates to depreciation of office,
communication and computer equipment and the amortization of intangible assets
acquired in the Company's various acquisitions, each of which has been accounted
for using the purchase method of accounting. The Company expects to continue to
make acquisitions and anticipates
22
<PAGE> 25
that such acquisitions will be accounted for using the purchase method of
accounting. As a consequence, it is likely that in the future the Company will
incur additional expense from amortization of acquired intangible assets,
including goodwill.
The Company intends to utilize $4.5 million of the net proceeds from the
Offering to redeem the Bridge Notes. The carrying value of the Bridge Notes,
approximately $3.9 million, is the estimated fair value of such facility at the
date of its issuance plus the amortization of the difference between such
estimated fair value and the principal amount through April 30, 1996.
Consequently, the Company will incur an extraordinary loss in the amount of this
difference, approximately $596,000, in connection with the redemption of the
Bridge Notes upon the closing of the Offering. See "Use of Proceeds."
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, certain items
from the Company's consolidated statement of operations, expressed as a
percentage of sales:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JULY 31, APRIL 30,
--------------------------- ----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................. 57.6 74.2 68.2 68.8 70.1
----- ----- ----- ----- -----
Gross profit................................. 42.4 25.8 31.8 31.2 29.9
Selling, general and administrative expenses... 103.3 34.9 33.6 37.2 24.8
Depreciation and amortization.................. 7.4 4.6 3.3 4.5 2.1
----- ----- ----- ----- -----
Operating income............................. (68.3) (13.7) (5.1) (10.5) 3.0
Interest expense............................... 3.4 2.2 1.9 2.1 2.2
Other (income) expense......................... (1.9) (0.7) 0.7 -- --
----- ----- ----- ----- -----
Income (loss) before taxes................... (69.8)% (15.2)% (7.7)% (12.6)% 0.8%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED APRIL 30, 1996 COMPARED TO NINE MONTHS ENDED APRIL 30, 1995
The nine months ended April 30, 1996 include the results of Dynamex Express
which was acquired by the Company on May 31, 1995. In addition the results for
that period include the results from the operations acquired from Mayne Nickless
on December 29, 1995 for the period January through April 30, 1996. As a result
of the Mayne Nickless acquisition, the Company obtained additional operations in
Los Angeles, San Diego, San Francisco, Seattle, Pittsburgh, Boston, Washington
D.C., Baltimore and Vancouver and Victoria, British Columbia.
Sales increased $38.7 million, or 341%, from $11.3 million for the nine
months ended April 30, 1995 to $50.0 million for the nine months ended April 30,
1996. Approximately $29.6 million of this increase is attributable to the
acquired operations of Dynamex Express and approximately $10.2 million is
attributable to the inclusion of the operations of Mayne Nickless. Sales
attributable to the previously existing operations of the Company declined by
approximately $1.1 million from the nine months ended April 30, 1995 to the nine
months ended April 30, 1996 primarily due to a decline in sales in Arizona that
was partially offset by increases in sales in Western Canada. In January and
February 1996, severe winter storms in the Eastern United States resulted in a
general disruption of commerce and therefore a decline in sales for the
Company's operations in those areas.
Cost of sales increased by $27.3 million, or 349%, from $7.8 million for
the nine months ended April 30, 1995 to $35.1 million for the nine months ended
April 30, 1996. Approximately $21.7 million of this increase is attributable to
the operations of Dynamex Express and approximately $6.4 million is attributable
to the operations of Mayne Nickless. This increase was partially offset by a
decrease in the cost of sales from the existing operations of the Company. The
Company's gross profit margin declined from 31.2% in the nine month period ended
April 30, 1995 to 29.9% in the nine month period ended April 30, 1996. The
decrease was
23
<PAGE> 26
primarily caused by two factors (i) the higher proportion of lower margin
scheduled distribution and fleet management business arising from the inclusion
of Dynamex Express operations in the 1996 period (which decrease was partially
offset by the additional higher margin on-demand business arising from the
inclusion of Mayne Nickless operations during four months of such period) and
(ii) the decline in gross margin attributable to the Company's operations in
Western Canada and Arizona due to competitive pressures and certain unprofitable
business. To a lesser extent, the increased cost of providing service during the
winter storms which occurred during the nine months ended April 30, 1996 had a
negative impact on the Company's gross profit margin during such period.
Selling, general and administrative expenses increased $8.2 million, or
193%, from $4.2 million for the nine months ended April 30, 1995 to $12.4
million for the nine months ended April 30, 1996, primarily because the 1996
period includes costs related to Dynamex Express operations and, to a lesser
extent, costs related to Mayne Nickless operations. As a percentage of sales,
selling, general and administrative expenses decreased from 37.2% for the nine
months ended April 30, 1995 to 24.8% for the nine months ended April 30, 1996.
This decrease resulted from a larger revenue base which enabled the Company to
spread such costs over more sales, and the absence of certain revisions to
accounting estimates made in the 1995 period. Despite this decrease, the Company
has continued to invest in and to incur significant costs related to its
national and regional marketing program. During the nine months ended April 30,
1995 the Company also revised its estimates of uncollectible accounts, accrued
insurance costs and other accrued liabilities. As a result of these revisions,
the Company recognized additional selling, general and administrative expenses
of approximately $715,000.
Depreciation and amortization expense for the nine months ended April 30,
1996 increased by $557,000, or 109%, from $509,000 for the nine months ended
April 30, 1995 to $1.1 million for the nine months ended April 30, 1996. Of this
increase, approximately $309,000 relates to depreciation and amortization of
assets related to Dynamex Express and approximately $251,000 relates to
depreciation and amortization of assets related to Mayne Nickless.
Interest expense increased $839,000, or 350%, from $240,000 for the nine
months ended April 30, 1995 to $1.1 million for the nine months ended April 30,
1996. Increased debt of approximately $4.7 million incurred in connection with
the acquisition of Dynamex Express created approximately $350,000 of this
increase while additional debt of $12.3 million incurred in connection with the
acquisition of Mayne Nickless resulted in increased interest expense of
approximately $535,000. These increases were partially offset by lower average
balances of other debt and reduced interest rates on certain debt refinanced at
the time of the Mayne Nickless acquisition.
YEAR ENDED JULY 31, 1995 COMPARED TO YEAR ENDED JULY 31, 1994
Effective May 31, 1995, the Company acquired Dynamex Express. As a result,
the Company's operating results for the year ended July 31, 1995 include the
results of Dynamex Express for the months of June and July. Sales increased by
approximately $14.0 million, or 199%, from $7.0 million for fiscal year 1994 to
$21.0 million for fiscal year 1995. Approximately $5.9 million of this increase
relates to the inclusion of Dynamex Express for two months in fiscal year 1995.
The balance of the increase results primarily from the inclusion of a full year
of results from acquisitions made by the Company during fiscal year 1994.
Cost of sales for fiscal 1995 increased approximately $9.1 million, or
175%, from $5.2 million in fiscal year 1994 to $14.3 million in fiscal year
1995, as a result of the increase in sales discussed above. Approximately $4.2
million of this increase is attributable to the inclusion of the operations of
Dynamex Express in 1995. The Company's gross profit margin increased to 31.8% in
fiscal 1995 as compared to 25.8% in fiscal 1994. This increase resulted
primarily from the change in business mix resulting from the acquired
businesses, including Dynamex Express. The businesses acquired by the Company
during fiscal 1994 had generally higher gross profit margins than the Company's
previously existing operations due to a higher proportion of on-demand business,
and as a consequence, the Company's average gross profit margin increased during
fiscal 1995. The operations of Dynamex Express historically had a lower gross
profit margin than the businesses acquired by the Company during 1994, but a
higher gross profit margin than the Company's previously existing operations.
24
<PAGE> 27
Selling, general and administrative expenses increased approximately $4.7
million, or 189%, from $2.4 million in fiscal 1994 to $7.1 million in fiscal
1995, due in part to the increased administrative activities associated with the
growth in revenues and the additional locations of the businesses acquired in
fiscal 1995 and 1994. As a percentage of sales, selling, general and
administrative expenses decreased in fiscal 1995 to 33.6% compared to 34.9% in
fiscal 1994.
Depreciation and amortization expense increased by $368,000, or 114%, from
$322,000 in fiscal 1994 to $690,000 in fiscal 1995. Of this increase,
approximately $76,000 relates to depreciation and amortization of assets related
to Dynamex Express with the balance relating to amortization of costs
attributable to acquisitions made during fiscal 1994.
Interest expense increased by $246,000, or 157%, from $157,000 in fiscal
1994 to $403,000 in fiscal 1995, as a result of debt incurred or assumed in
connection with these acquisitions.
YEAR ENDED JULY 31, 1994 COMPARED TO YEAR ENDED JULY 31, 1993
The Company's sales increased by approximately $6.3 million, or 865%, from
$728,000 in fiscal year 1993 to $7.0 million in fiscal year 1994, primarily as a
result of the Company's acquisition of five different courier operations between
December 1993 and June 1994. Prior to these acquisitions, the Company operated
only in Arizona. With these acquisitions, the Company established operations in
Chicago, Illinois; Los Angeles, California; and in Western Canada. During this
period, cost of sales increased by approximately $4.8 million, or over 1,000%,
from $419,000 in 1993 to $5.2 million in 1994, in conjunction with the increase
in sales. Selling, general and administrative expenses increased by
approximately $1.7 million, or 226%, from $752,000 in fiscal 1993 to $2.4
million in fiscal 1994 as the Company's sales and administrative activities
increased as a result of the newly acquired operations. Depreciation and
amortization increased by $268,000, or 496%, from $54,000 in fiscal 1993 to
$322,000 in fiscal 1994, due to the amortization of the costs of the acquired
operations discussed above in fiscal 1994. These acquisitions were financed
partially with debt and consequently, the Company's interest expense increased
$132,000, or 528%, from $25,000 in fiscal 1993 to $157,000 in fiscal 1994. Due
to the small revenue base of the Company's business in fiscal year 1994,
comparisons of costs and expenses, expressed as a percentage of sales, between
fiscal 1993 and 1994 are not meaningful.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements relate to its acquisition
strategy and, to a lesser extent, working capital and capital expenditures.
Since July 31, 1992, the Company has completed 10 acquisitions of same-day
courier companies with consideration therefor, including transaction costs,
aggregating approximately $30.0 million (of which approximately $17.5 million
was paid in cash). For the nine months ended April 30, 1996 and for the year
ended July 31, 1995, capital expenditures were $446,000 and $213,000,
respectively. As of April 30, 1996, the Company's working capital was $3.3
million. Prior to the nine months ended April 30, 1996, the Company's operations
did not produce positive cash flow from operations, and the Company's capital
needs during these periods were supplied from bank borrowings, seller financing
and the private placement of debt and equity securities. In December 1995, the
Company entered into a bank credit facility to provide funds for the acquisition
of Mayne Nickless and to refinance a significant portion of the seller financing
that had been incurred in connection with prior acquisitions. As of April 30,
1996, total funded debt was approximately $21.5 million (principal amount), of
which approximately $800,000 was outstanding under the Company's $2.5 million
revolving bank line of credit. The Company intends to retire substantially all
outstanding funded debt with a portion of the net proceeds of the Offering. On
July 5, 1996 the Company amended and restated the Credit Agreement to provide
for a $40.0 million revolving credit facility.
An integral part of the Company's business strategy is to pursue
acquisitions. Therefore, the Company's need for capital related to acquisitions
is expected to be significant in the future. As a result of increasing sales
arising from new acquisitions as well as internal growth, the Company also
anticipates that it will need additional working capital from time to time to
finance the resulting increase in accounts receivable in relation to accounts
payable. Capital expenditures, other than for acquisitions, are not expected to
increase materially in relation to total capital needs in the foreseeable
future.
25
<PAGE> 28
Management expects to fund the capital requirements discussed above
primarily from four sources: (i) excess net proceeds from the Offering, if any;
(ii) the issuance of additional common equity in connection with future
acquisitions (including the Acquisitions); (iii) cash flow from operations; and
(iv) additional borrowings from banks. See "Use of Proceeds" and
"Business -- Pending Acquisitions."
On July 5, 1996, the Company amended and restated the Credit Agreement. The
Company's new credit facility under the Credit Agreement consists of a revolving
note of up to $40.0 million with interest payable quarterly at the prime rate,
or certain other rate options based on certain financial ratios of the Company.
Any amounts outstanding under the revolving note on May 31, 1998 will be
converted to a term facility which will be repayable in nineteen equal quarterly
installments of principal over a five year period. Interest on the term facility
is payable quarterly at the prime rate, or certain other rate options based on
certain financial ratios of the Company.
Amounts outstanding under the Credit Agreement are secured by essentially
all of the assets of the Company and its subsidiaries. The Credit Agreement also
contains restrictions on the payment of dividends, incurring additional debt,
capital expenditures and investments by the Company as well as requiring the
Company to maintain certain financial ratios. See Note 5 of Notes to the
Consolidated Financial Statements.
Management believes that sources of capital discussed above, namely excess
proceeds of the Offering, if any, cash flow from operations, and the Company's
credit facility will be sufficient to allow the Company to successfully pursue
its business strategy over the next 18 to 24 months. It is anticipated that
future acquisitions will be structured with a combination of cash and the
Company's Common Stock being used as consideration. The amount of capital
available for future acquisitions will depend in part on the willingness of
sellers to accept the Company's Common Stock as partial consideration. This in
turn will be dependent in part on the financial performance and condition of the
Company as well as general market conditions. If unable to utilize its Common
Stock to finance such acquisitions, or if the size and number of acquisitions
utilizes its available resources or exceeds the threshold above which lender
approval is required under the Credit Agreement and such approval is not
obtained, the Company may be forced to seek other sources of capital such as
additional debt or equity financing. There can be no assurance that such
additional sources of capital will be available or that they will be available
on terms which are acceptable to the Company. These factors could serve to
negatively affect the Company's ability to implement its business strategy in
the manner, or within the time frame, anticipated by management.
INFLATION
The Company does not believe that inflation has had a material effect on
the Company's results of operations nor does it believe it will do so in the
foreseeable future.
ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 establishes a fair value based method of
accounting for stock-based employee compensation plans; however, it also allows
companies to continue to measure cost for such plans using the method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25). Companies that elect to continue with
the accounting under APB 25 must provide certain pro forma disclosures of net
income, as if SFAS 123 had been applied. The accounting and disclosure
requirements of SFAS 123 are effective for the Company for transactions entered
into in fiscal 1997. The Company is currently evaluating its alternatives under
SFAS 123, and its impact on operating results, when adopted by the Company, is
not presently known.
26
<PAGE> 29
BUSINESS
GENERAL
The Company is a leading provider of same-day delivery and logistics
services in the U.S. and Canada. Through internal growth and acquisitions, the
Company has built the only national network of same-day delivery and logistics
systems in Canada and has established operations in 10 U.S. metropolitan areas
from which it intends to build a national network in the U.S. The Company
capitalizes on its routing, dispatch and vehicle management expertise developed
in the ground courier business to provide its customers with a broad range of
value added, same-day distribution and logistics services.
Through its network of branch offices, the Company provides same-day,
door-to-door delivery services utilizing ground couriers for intra-city
deliveries and third party air transportation providers in conjunction with
ground couriers for inter-city deliveries. The Company's same-day delivery
services include both on-demand and scheduled deliveries. On-demand services are
typically unscheduled deliveries of time-sensitive materials and include
deliveries of inventory made on a just-in-time basis from strategic stocking
locations managed by Company personnel. Scheduled distribution services
encompass recurring, often daily, deliveries provided on a point-to-point basis
or deliveries that require intermediate handling, routing or sorting of items to
be delivered to multiple locations. With its fleet management services, the
Company assumes complete responsibility for providing and managing a fleet of
dedicated vehicles at a customer site. The Company's on-demand delivery
capabilities are available to supplement the scheduled distribution and
dedicated fleets as necessary.
The Company intends to expand its operations in the U.S. and Canada by (i)
increasing customer utilization of its primary services at each location, (ii)
targeting national and regional accounts, (iii) creating alliances with
strategic partners, and (iv) pursuing acquisitions of high quality same-day
delivery companies.
INDUSTRY OVERVIEW
The delivery and logistics industry is large, highly fragmented and
growing. The industry is composed primarily of same-day, next-day and second-day
service providers. The Company primarily services the same-day, intra-city
delivery market. Historically, same-day delivery service primarily related to
downtown document deliveries. Over time, technological developments such as
facsimile and electronic mail have increased time sensitivity in a variety of
business transactions, thereby increasing demand for the same-day delivery of
non-faxable items. The category of non-faxable items that require time sensitive
delivery is vast and includes items such as voluminous or confidential
documents, critical manufacturing parts, medical devices and replacement
computer parts.
The Company believes that the same-day delivery and logistics industry
offers substantial consolidation opportunities as a result of industry
fragmentation and the benefits of large scale operations. The same-day delivery
and logistics industry in the U.S. and Canada is highly fragmented and primarily
consists of several thousand small, independent businesses serving local markets
and a small number of multi-location regional or national operators. Relative to
smaller companies, the Company believes that national operators such as the
Company benefit from several competitive advantages including: national brand
identity, professional management, the ability to service national accounts and
centralized administrative and management information systems.
In an effort to control costs and focus on primary competencies, many
businesses are seeking to reduce their reliance on in-house transportation
departments by turning to third party experts to provide transportation
logistics services. These logistics services include designing and managing
systems created to maximize efficiencies in transporting, warehousing, sorting
and delivering products. Many businesses that outsource their distribution
requirements prefer to purchase such services from one source that can service
multiple cities, thereby decreasing the number of vendors from whom they
purchase services.
27
<PAGE> 30
THE DYNAMEX EXPRESS BUSINESS MODEL
The Company was founded in 1992 as Parcelway Systems Holding Corp. In May
1995, the Company acquired Dynamex Express, the ground courier operations of Air
Canada, which was led by Richard K. McClelland, the Company's Chief Executive
Officer. At the time of its acquisition by the Company, Dynamex Express had
developed an integrated network of locations across Canada and offered an array
of delivery and logistics services on a national, multi-city and local basis.
The Company seeks to expand its operations by implementing and expanding upon
the business strategy utilized by Dynamex Express.
Prior to 1989, Dynamex Express concentrated on same-day document delivery
in the central business districts of the major metropolitan cities of Canada.
Recognizing that an increasing variety of business transactions were becoming
more time sensitive and in order to offset declining volumes in same-day
document delivery, Dynamex Express expanded its customer base to include
manufacturing companies, pharmaceutical companies, auto parts distributors,
governmental agencies and other businesses that require same-day delivery of
non-faxable items. Dynamex Express further responded to shifting market
conditions by leveraging its ability to efficiently provide same-day delivery of
small to mid-size items in metropolitan areas to provide value added services
such as fleet management and strategic stocking.
Dynamex Express also expanded its business by acquiring other same-day,
intra-city courier companies within Canada. By May 1995, Dynamex Express had
acquired a regional and several single-site courier companies across Canada and
had locations in 20 Canadian cities. Dynamex Express expanded the service
offerings of these acquired companies to include fleet management and strategic
stocking and standardized the operating policies and procedures at each
location. At the time of the Company's acquisition of Dynamex Express in May
1995, approximately 46% of Dynamex Express revenues were generated from same-day
on-demand delivery, 30% from fleet management and 24% from same-day scheduled
distribution services. Approximately 48% of these revenues were generated from
services provided to customers on a national or multi-city basis.
BUSINESS STRATEGY
The Company intends to implement and expand upon the Dynamex Express
business model in the U.S. and Canadian markets in order to capitalize on the
demand of local, regional and national businesses for innovative same-day
distribution solutions. The key elements of the Company's business strategy are
as follows:
- FOCUS ON PRIMARY SERVICES. The Company provides three primary services:
(i) same-day on-demand delivery, (ii) same-day scheduled distribution and
(iii) fleet management. To raise the yield per delivery, the Company will
continue to focus its same-day on-demand delivery business on non-faxable,
time sensitive items that are transported throughout major metropolitan
areas and to offer value added on-demand services such as strategic
stocking. By concentrating its logistics services in fleet management and
same-day scheduled distribution, the Company intends to capitalize on the
market trend towards outsourcing transportation requirements. The delivery
transactions in a fleet management, scheduled distribution or strategic
stocking program are recurring in nature, thus creating the potential for
long term customer relationships. Additionally, these services are
generally less vulnerable to price competition than traditional delivery
services.
- TARGET NATIONAL AND REGIONAL ACCOUNTS. The Company's sales force focuses
on pursuing and maintaining national and regional accounts. The Company
anticipates that its (i) existing multi-city network of locations combined
with new locations to be acquired, (ii) ability to offer value added
services such as strategic stocking and fleet management to complement its
basic same-day delivery services and (iii) experienced management team
will create further opportunities with many of its existing customers and
attract new national and regional accounts.
- CREATE STRATEGIC ALLIANCES. By forming alliances with strategic partners
that offer compatible services or have complex distribution needs, the
Company and its partner can jointly market their services, thereby
accessing one another's customer base and providing such customers with a
broader range of
28
<PAGE> 31
services. Pursuant to its strategic alliance with Purolator Courier Ltd.
("Purolator"), the largest Canadian overnight courier company, the Company
and Purolator have agreed to provide one another with wholesale courier
services and to market the other partner's delivery services to its
customers. See "Sales and Marketing."
- PURSUE ACQUISITIONS. The Company believes that the highly fragmented
nature of the delivery and logistics industry creates significant
opportunities for same-day delivery and logistics companies with national
marketing efforts and operations. Upon consummation of the Acquisitions,
the Company will have substantially completed its Canadian network and
will focus its acquisition program on further penetrating the U.S. market.
The Company will seek to acquire high quality same-day delivery businesses
in new cities as well as in markets where it has already established a
presence. The Company plans to augment the service offerings of its
acquired companies with additional services such as fleet management and
strategic stocking and to integrate the acquired operations into the
Company's operating environment. Acquisitions in existing markets are
expected to give the Company access to an acquired company's customer base
while creating operating efficiencies within these markets. The Company
believes that its management team's operating and acquisition experience
will allow it to remain competitive in the acquisition market.
SERVICES
The Company capitalizes on its routing, dispatch and vehicle management
expertise developed in the ground courier business to provide its customers with
a broad range of value added, same-day delivery and logistics services. By
creating innovative applications of its core services, the Company intends to
expand the market for its distribution solutions and increase the yield per
service provided.
Same-Day On-Demand Delivery
The Company provides local same-day on-demand delivery services, whereby
Company messengers or drivers respond to a customer's request for immediate
pick-up and delivery. The Company augments its same-day on-demand services by
offering inter-city ground and air transportation and next-flight-out services
provided by third party air transportation operators. The Company focuses on the
delivery of non-faxable, time sensitive items throughout major metropolitan
areas rather than traditional downtown document delivery. By delivering items of
greater weight over longer distances and providing value added on-demand
services such as strategic stocking, the Company expects to continue to raise
the yield per delivery relative to the yield generated from downtown document
deliveries.
The Company's on-demand services include the delivery of a customer's
inventory on a just-in-time basis from strategic stocking locations managed by
Company personnel. Strategic stocking locates the customer's inventory closer to
its ultimate destination, thereby improving the customer's ability to service
its own customers. The Company does not take ownership of or title to the
inventory but provides the warehouse space or utilizes space provided by its
customer to establish and manage a customized, multi-site strategic stocking
program. Furthermore, the Company can bundle services such as same-day ground,
same-day air and next-day air delivery to replenish stocking locations.
The benefits of strategic stocking to the customer include (i) faster
response time due to broader distribution of inventory locations and emergency
transportation capabilities, (ii) decreased lease and employee costs associated
with warehouse functions resulting from the Company's ability to consolidate
warehouse space and administrative costs for multiple strategic stocking
customers and (iii) improved inventory control through improved information
systems. For example, when a computer parts and services distributor must
quickly replace defective or worn out computer parts, the potential loss to the
distributor's customer increases with the length of time it takes the
distributor to deliver and install the replacement part. By storing computer
parts in the Company's network of strategic stocking locations, the distributor
can contact the Company and have the replacement part delivered to its customer
within hours instead of days. The Company has targeted the computer and
telecommunications industries as primary markets for strategic
29
<PAGE> 32
stocking services and has established a network of parts banks across Canada to
serve such markets. Additionally, the Company has introduced a service
enhancement, whereby straightforward repairs, such as replacement of a defective
keyboard, are performed by Company drivers, thus eliminating the need to
dispatch a technician.
While strategic stocking currently comprises only a small portion of the
Company's same-day on-demand business, the Company intends to expand its
strategic stocking program and has recently purchased strategic stocking
software, hardware and certain other related assets from an experienced
strategic stocking operator whom the Company now employs. The Company intends to
expand the network of parts banks and courier alliances established by this
operator by utilizing its own courier network in the U.S. and Canada and intends
to utilize the additional courier alliances to increase its next-flight-out
capability.
For the nine months ended April 30, 1996, approximately 61% of the
Company's revenues were generated from on-demand same-day delivery services,
including strategic stocking services.
Same-Day Scheduled Distribution
The Company provides same-day scheduled distribution services for
time-sensitive local deliveries that, by their nature, are recurring. Scheduled
distribution services include regularly scheduled deliveries made on a
point-to-point basis or deliveries that require intermediate handling, routing
or sorting of items to be delivered to multiple locations. A bulk shipment may
be received at the Company's warehouse where it is sub-divided into smaller
bundles and sorted for delivery to specified locations. Same-day scheduled
distribution services are provided on both a local and multi-city basis. The
Company's on-demand delivery capabilities are available to supplement the
scheduled drivers as needed. In the suburban Washington, D.C./Baltimore area,
the Company provides scheduled, as well as on-demand, delivery services for a
group of local hospitals and medical laboratories, transferring samples between
these facilities. In Ontario, Canada, the Company services the scheduled
distribution requirements of a consortium of commercial banks. These banks
require regular pick-up of non-negotiable materials that are then delivered by
the Company on an intra and inter-city basis. For the nine months ended April
30, 1996, approximately 17% of the Company's revenues were generated from
same-day scheduled distribution services.
Fleet Management
With its fleet management service, the Company provides transportation
services for customers that previously managed such operations in-house. The
Company assumes complete responsibility for providing and managing a fleet of
dedicated vehicles at the customer's site. This service is generally provided
with a fleet of dedicated vehicles that can range from passenger cars to tractor
trailers (or any combination) which may display the customer's logo and colors.
In addition, the Company's on-demand delivery capability may supplement the
dedicated fleet as necessary, thereby allowing a smaller dedicated fleet to be
maintained on average. The Company's fleet management services include designing
and managing systems created to maximize efficiencies in transporting, sorting
and delivering customer's products on a local and multi-city basis. Because the
Company generally does not own vehicles but instead hires drivers who do, the
Company's fleet management solutions are not limited by the Company's need to
utilize its own fleet.
By outsourcing its fleet management the Company's customer (i) is able to
utilize the Company's distribution and route optimization experience to deliver
its products more efficiently, (ii) gains the flexibility to expand or contract
fleet size as necessary, and (iii) reduces the costs and administrative burden
associated with owning or leasing vehicles and hiring and managing
transportation employees. For example, the Company recently configured and now
manages a distribution fleet for one of the largest distributors to drug stores
in Canada. For the nine months ended April 30, 1996, approximately 22% of the
Company's revenues were generated from fleet management services.
While the volume of each service provided and the profitability thereof
varies significantly from branch office to branch office, each of the Company's
branch offices generally offers the same core services. Factors which impact the
business mix per branch include customer base, competition, geographic
characteristics, available labor and general economic environment. The Company
can bundle its various delivery and logistics
30
<PAGE> 33
services to create customized distribution solutions and to become the
single-source for its customers' distribution needs.
OPERATIONS
The Company's operations are divided into two U.S. regions and two Canadian
regions, with each of the Company's 29 branches reporting to a regional office.
Branch operations are locally managed with regional and national oversight and
support provided as necessary. A branch manager is assigned to each branch
office and is accountable for all aspects of branch operations including
profitability. Each branch manager reports to a regional manager with similar
responsibilities for all branches within his or her region. Certain
administrative and marketing functions may be centralized for multiple branches
in a given city or region. Prices for the Company's services are determined at
the branch level based on the distance, weight and time-sensitivity of a
particular delivery.
Same-Day On-Demand Delivery
Most locations have operations centers staffed by dispatchers, as well as
customer service representatives and operations personnel. Incoming calls are
received by trained customer service representatives who use PC-based
communications software to instantly provide the customer with a job-specific
price quote and to transmit the order to the appropriate dispatch location.
Certain of the Company's larger clients can access such software through
electronic data interface to enter dispatch requirements, page specific drivers,
make inquiries, and receive billing information. A dispatcher coordinates
shipments for delivery within a specific time frame. Shipments are routed
according to the type and weight of the shipment, the geographic distance
between the origin and destination and the time allotted for the delivery.
Coordination and deployment of delivery personnel for on-demand deliveries is
accomplished either through communications systems linked to the Company's
computers, through pagers or by radio. The Company is in the process of
integrating the software system utilized by Dynamex Express into each of its
branches in order to standardize the reporting, tracking and billing of
transactions. To enhance the Company's 24-hour delivery services at all
locations, the Company is currently implementing a company-wide centralized
answering service to transmit delivery requests made after normal business hours
to the appropriate local operations team.
Same-Day Scheduled Distribution
A dispatcher coordinates and assigns scheduled deliveries to the drivers
and manages the delivery flow. In many cases, certain drivers will handle a
designated group of scheduled routes on a recurring basis. Any intermediate
handling required for a scheduled distribution is conducted at the Company's
warehouse or at a third party facility such as the airport.
Fleet Management
Fleet management services are coordinated by the Company's logistics
specialists who have experience in designing, implementing and managing
integrated networks for transportation services. Based upon the logistics
specialist's analysis of a customer's fleet and distribution requirements, the
Company develops a plan to optimize fleet configuration and route design. The
Company provides the vehicles and drivers necessary to implement the fleet
management plan. Such vehicles and drivers are generally dedicated to a
particular customer, and the vehicles may display the customer's name and logo.
The Company can supplement these dedicated vehicles and drivers with its
on-demand capability as necessary.
SALES AND MARKETING
The Company conducts a comprehensive marketing program involving direct
sales and customer service to maintain and increase its customer base.
Approximately 50 local employee sales representatives target small and mid-sized
businesses while the Company's eight regional and national marketing executives
focus on larger accounts and businesses with multi-city requirements. The
Company's sales force includes product specialists dedicated to fleet management
and strategic stocking, some of whom have developed expertise in
31
<PAGE> 34
servicing certain industries such as banks and telecommunications companies. The
Company's product specialists seek new applications of the Company's primary
services in an effort to expand the demand for such services.
The Company's marketing representatives make regular calls on existing and
potential customers to identify such customers' delivery and logistics needs.
Customer service representatives on the local and national levels regularly
communicate with customers to monitor the quality of services and to quickly
respond to customer concerns. Through its telemarketing program, the Company
maintains a database of its customers' service utilization patterns and
satisfaction level. The telemarketing database is used by the sales force to
analyze opportunities and conduct performance audits. The telemarketing group
seeks to contact most of the Company's recurring customers approximately every
90 days.
Fostering strategic alliances with customers who offer compatible services
or have complex distribution needs is an important component of the Company's
marketing strategy. For example, pursuant to the Company's agreement with
Purolator, the Company has agreed to provide Purolator with the following
services which Purolator will in turn market to its customers: (i) same-day
local ground courier services; (ii) same-day inter-city ground courier services;
and (iii) next-flight-out service between major cities in Canada and the U.S.
The Company will also provide Purolator with local and inter-city same-day
ground courier service for misdirected Purolator shipments. Purolator has agreed
to provide the Company with overnight delivery services which the Company will
in turn market to its customers. Purolator is the largest overnight courier in
Canada with approximately 9,000 employees who handle approximately 300,000
packages daily. The Company believes that the increased transaction volume and
marketing efforts contemplated by the Purolator alliance could significantly
increase the Company's business in Canada.
The Company generally enters into customer contracts for scheduled
distribution, fleet management and strategic stocking services which are
terminable (in selected cases with cancellation penalties) by such customer upon
notice generally ranging from 30 to 90 days. The Company does not typically
enter into contracts with its customers for on-demand delivery services other
than strategic stocking services.
CUSTOMERS
As of April 30, 1996, the Company had a diversified customer base of
approximately 18,000 active customers across the U.S. and Canada. The Company's
target customer is a business that distributes time-sensitive, non-faxable items
that weigh from one to 70 pounds to multiple locations. The primary industries
served by the Company include financial services, pharmaceuticals, medical
laboratories and hospitals, auto parts, legal services and Canadian governmental
agencies. As of April 30, 1996, no single industry accounted for more than 10%
of the Company's annual revenues. A significant number of the Company's
customers are located in Canada. Approximately 60% of the Company's pro forma
revenues for the nine months ended April 30, 1996 were generated in Canada. See
Note 8 of Notes to the Consolidated Financial Statements and "Pro Forma
Financial Information."
COMPETITION
The market for same-day delivery and logistics services has been and is
expected to remain highly competitive. The Company believes that the principal
competitive factors in the markets in which it competes are reliability,
quality, breadth of service and price. Price competition for basic delivery
services is particularly intense.
Most of the Company's competitors in the same-day intra-city delivery
market are privately held companies that operate in only one location, with no
one competitor dominating the market. However, there is a trend toward industry
consolidation and companies with greater financial and other resources than the
Company that may not currently operate in the delivery and logistics business
may enter the industry to capitalize on such trend.
The market for the Company's logistics services is also highly competitive,
and can be expected to become more competitive as additional companies seek to
capitalize on the growth in the industry. The
32
<PAGE> 35
Company's principal competitors for such services are other delivery companies
and in-house transportation departments. The Company generally competes on the
basis of its ability to provide customized service regionally and nationally,
which it believes is an important advantage in this highly fragmented industry,
and on the basis of price.
The Company competes for acquisition candidates with other companies in the
industry and companies that may not currently operate in the industry but may
acquire and consolidate local courier businesses. Management believes that its
operating experience and its strategy to fully integrate each acquired company
by adding its core services and introducing national marketing will allow it to
remain competitive in the acquisition market.
PENDING ACQUISITIONS
The aggregate consideration to be paid by the Company in the Acquisitions
will be approximately $7.2 million in cash and 126,170 shares of Common Stock
(assuming an initial public offering price of $11.00 per share) and the Company
will repay an aggregate of approximately $840,000 of the Acquired Companies'
indebtedness. The stockholders of each of the Acquired Companies, except for
Action Delivery and Southbank, will receive a portion of their consideration for
the Acquisitions in the form of Common Stock issued at the initial public
offering price and cash. The stockholders of Action Delivery and Southbank will
receive only cash. The consideration to be paid by the Company for the Acquired
Companies was determined through arms-length negotiations among the Company and
the representatives of the stockholders of the Acquired Companies. The factors
considered by the parties in determining the purchase price include, among
others, the historical operating results and the future prospects of the
Acquired Companies.
Upon consummation of the Acquisitions, the Company intends to integrate the
Acquired Companies into the Company's operating environment. Each Acquired
Company will be assigned to the appropriate regional division of the Company. A
current manager of each Acquired Company has agreed to continue to manage such
operation after the consummation of the Acquisitions and will be appointed
branch manager at such operation. Management will train the staff of the
Acquired Companies so that each branch will be able to provide and market the
full range of Company services. As soon as practicable and where appropriate,
the Company will assimilate each Acquired Company's accounting, payroll and cash
management functions, standardize its insurance coverage and employee benefits
and supplement or replace the use of the Acquired Company's tradename with
"Dynamex."
Although the consummation of the transactions contemplated by the
Acquisition Agreements is subject to customary conditions, these conditions have
been substantially satisfied, and each of the Acquisitions is expected to be
consummated in accordance with its terms.
For purposes of the information set forth below concerning each of the
Acquired Companies (i) the number of shares to be issued as consideration for
the Acquisitions is calculated based on an assumed initial public offering price
of $11.00 per share and (ii) Canadian dollar amounts relevant to the Action
Delivery and Zipper Acquisitions have been converted to U.S. dollars using an
exchange rate of 0.73 U.S. dollars to 1.00 Canadian dollars:
Action Delivery. Action Delivery is based in metropolitan Halifax,
Nova Scotia and operates on-demand and scheduled ground courier services in
the greater Halifax metropolitan area. The stockholders of Action Delivery
will receive an aggregate of Cdn $200,000 (approximately $146,000) in the
Acquisition, and the Company will repay Action Delivery's bank indebtedness
of approximately Cdn $705,000 (approximately $515,000). The current general
manager of Action Delivery will continue to manage the operations of such
company after the closing of the Acquisition. The stockholders of Action
Delivery have entered into a covenant not to compete with the Company
expiring no earlier than the third anniversary of the closing of the
Acquisition.
Seidel Delivery. Seidel Delivery is based in Columbus, Ohio and
operates on-demand and scheduled ground courier services in the greater
Columbus metropolitan area. The stockholder of Seidel Delivery will receive
an aggregate of 30,227 shares of Common Stock and $332,500 in cash in the
Acquisition. The
33
<PAGE> 36
stockholder of Seidel Delivery has agreed to continue to manage the
operations of such company after the closing of the Acquisition and has
agreed to enter into a covenant not to compete with the Company expiring no
earlier than the third anniversary of the date of such closing.
Seko/Metro. Seko/Metro is based in Chicago, Illinois and operates
on-demand and scheduled ground courier services in the greater Chicago
metropolitan area. The stockholders of Seko/Metro will receive an aggregate
of 54,545 shares of Common Stock and $2.4 million in cash in the
Acquisition. The current managers of Seko/Metro have agreed to continue to
manage the operations of such company after the closing of the Acquisition.
The principal stockholders of Seko/Metro have agreed to enter into a
covenant not to compete with the Company expiring no earlier than the third
anniversary of the date of the closing of the Acquisition.
Southbank. Southbank is based in New York, New York and operates
on-demand ground courier services in the greater New York City metropolitan
area, concentrating primarily on Manhattan. The sole stockholder of
Southbank, Express It Acquisition, Inc. ("Express It") will receive an
aggregate of $2.5 million in cash in the Acquisition. Express It operates
an additional on-demand ground courier business in the greater New York
City metropolitan area which serves a different customer base than
Southbank. The Company and Express It have entered into an Agency and
Support Agreement whereby both parties will assist one another in certain
operational, administrative and marketing matters with respect to such
business. The owners of Express It have also granted the Company an 18
month option to purchase the stock of Express It for $3.25 million payable
in Common Stock issued at the initial public offering price.
Zipper. Zipper is based in Winnipeg, Manitoba and operates on-demand
and scheduled ground courier operations in the greater Winnipeg
metropolitan area. The stockholder of Zipper, K.H.B. & Associates Ltd.,
will receive an aggregate of 41,398 shares of Common Stock and an aggregate
of approximately Cdn $2.5 million (approximately $1.8 million) in cash in
the Acquisition. In addition, simultaneously with the closing of such
Acquisition, the Company will repay Zipper's bank indebtedness of
approximately Cdn $445,000 (approximately $325,000). Bruce Bishop, the son
of Zipper's sole stockholder and president, Kenneth Bishop, is the current
general manager of sales and support of Zipper and has agreed to continue
to manage the operations of such company after the closing of the
Acquisition. Kenneth Bishop has been nominated to become a director of the
Company upon consummation of the Offering and has agreed to enter into a
covenant not to compete with the Company expiring no earlier than the third
anniversary of the date of such closing.
REGULATION
As of January 1, 1995, the U.S. Federal Aviation Administration
Authorization Act of 1994 became effective, abolishing all intrastate regulatory
control over prices, routes and services to which the Company had previously
been subject. This legislation has increased the ability of the Company to
expand into new states and to expand its presence in its existing areas of
service. The Company holds nationwide general commodities authority from the
Interstate Commerce Commission and/or the Federal Highway Administration of the
U.S. Department of Transportation to transport certain property as a motor
carrier on an interstate basis within the contiguous 48 states. The Trucking
Industry Regulatory Reform Act of 1994 further deregulated certain aspects of
the transportation industry, so that the Company will no longer be required to
file tariffs setting forth its interstate rates. The Company holds permanent
extra-provincial (and where required, intra-provincial) operating authority in
all Canadian provinces where the Company does business.
In connection with the operation of certain motor vehicles and the handling
of hazardous materials in its courier operations, the Company is subject to
regulation by the United States Department of Transportation and the states and
by the appropriate Canadian federal and provincial regulations. The Company is
also subject to regulation by the Occupational Health and Safety Administration,
provincial occupational health and safety legislation and federal and provincial
employment laws respecting such matters as hours of work, driver logbooks and
workers' compensation. To the extent the Company holds licenses to operate
two-way
34
<PAGE> 37
radios to communicate with its fleet, the Company is regulated by the Federal
Communications Commission. The Company believes that it is in substantial
compliance with all of these regulations.
SAFETY
From time to time, the Company's drivers are involved in accidents or other
activities that may give rise to liability claims. The Company currently carries
liability insurance with an aggregate limit of $15.0 million, and independent
owner/operators are required to maintain liability insurance of at least the
minimum amounts required by applicable state or provincial law. The Company also
has insurance policies covering property and fiduciary trust liability, which
coverage includes all drivers. The Company reviews prospective drivers to ensure
that they have acceptable driving records. In addition, where required by
applicable law, the Company requires prospective drivers to take a physical
examination and to pass a drug test.
PROPERTIES
The Company operates its facilities in 42 locations, all of which are
leased. These facilities are principally used for operations, general and
administrative functions and training. Several of these facilities are primarily
used as storage and warehouse space for strategic stocking. The chart below
summarizes the locations of facilities which the Company leases as of June 30,
1996:
<TABLE>
<CAPTION>
NUMBER OF
LOCATION LEASED PROPERTIES
--------------------------------------------- -----------------
<S> <C>
CANADA
Alberta...................................... 8
British Columbia............................. 6
Manitoba..................................... 1
Nova Scotia.................................. 1
Ontario...................................... 10
Quebec....................................... 2
Saskatchewan................................. 3
--
Total.............................. 31
==
U.S.
Arizona...................................... 1
California................................... 3
District of Columbia......................... 1
Illinois..................................... 1
Maryland..................................... 1
Massachusetts................................ 1
Pennsylvania................................. 1
Texas........................................ 1
Washington................................... 1
--
Total.............................. 11
==
</TABLE>
The Company believes that its properties are well maintained, in good
condition and adequate for its present needs. The Company anticipates that
suitable additional or replacement space will be available when required. The
Company's facilities rental expense for the fiscal year ended July 31, 1995 and
the nine months ended April 30, 1996 was approximately $458,000 and $842,000,
respectively. The Company's principal executive offices are currently located in
Mississauga, Ontario, although the Company anticipates that it will move such
offices to Dallas, Texas within the next 18 months. See Note 6 of Notes to the
Consolidated Financial Statements.
35
<PAGE> 38
INTELLECTUAL PROPERTY
The Company has filed applications in the United States and Canada for
federal trade mark registration of "Dynamex" and "Dynamex Express." No assurance
can be given that any such registration will be granted or that if granted, such
registration will be effective to prevent others from using the trade mark
concurrently or preventing the Company from using the trade mark in certain
locations.
EMPLOYEES
At June 30, 1996, the Company had approximately 1,100 employees, of which
approximately 700 were employed full-time primarily in various management,
supervisory, administrative, and corporate positions, approximately 360 were
employed full-time as drivers and approximately 40 were employed part-time,
primarily as drivers. Additionally at June 30, 1996, the Company had contracts
with approximately 1,900 independent owner/operators. Management believes that
the Company's relationship with such employees and independent owner/operators
is good. See "Risk Factors -- Certain Tax Matters Related to Drivers."
In Canada, approximately 60% of the Company's drivers are represented by
major international labor unions. Management believes that the Company's
relationship with such unions is good. None of the Company's U.S. employees or
drivers are represented by unions.
LEGAL PROCEEDINGS
There are no pending legal proceedings involving the Company other than
routine litigation incidental to the Company's business, including numerous
motor vehicle-related accident claims. In the opinion of the Company's
management, such proceedings should not, individually or in the aggregate, have
a material adverse effect on the Company's business, financial condition or
results of operations.
36
<PAGE> 39
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information concerning each of the
persons who are (i) executive officers, (ii) key employees or (iii) directors or
persons who have been nominated to become directors. Each person nominated as a
director (as indicated below) has agreed to become a director of the Company
upon the closing of the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------- --- --------------------------------------------
<S> <C> <C>
Richard K. McClelland.............. 44 Chairman of the Board, President, Chief
Executive Officer and Director
Robert P. Capps.................... 42 Vice President-Finance and Corporate
Development, Treasurer and Assistant
Secretary
Martin A. Piccolo.................. 40 Controller and Secretary
James R. Aitken.................... 36 General Manager -- Eastern Canada
Catherine J. Taylor................ 41 General Manager -- Midwestern Canada
Ralph Embree....................... 46 General Manager -- Eastern U.S.
Thomas R. Stotler.................. 55 General Manager -- Western U.S.
James M. Hoak...................... 52 Director
Stephen P. Smiley.................. 47 Director(2)
Wayne Kern......................... 63 Director
Brian J. Hughes.................... 35 Director(1)(2)
Kenneth H. Bishop.................. 58 *Director(1)(2)
E. T. Whalen....................... 63 *Director
</TABLE>
- ---------------
* Nominee
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Richard K. McClelland became the President and Chief Executive Officer of
the Company in May 1995 upon the closing of the Company's acquisition of Dynamex
Express, where he also served as President since 1988. He was elected as
Chairman of the Board of the Company in February 1996. Prior to joining Dynamex
Express in 1986, Mr. McClelland held a number of advisory and management
positions with the Irving Group, Purolator Courier Ltd. and Sunbury Transport
Ltd., where he was engaged in the domestic and international same-day air,
overnight air, and trucking businesses.
Robert P. Capps has served as Vice President of Finance and Corporate
Development, Treasurer and Assistant Secretary of the Company since February
1996. Mr. Capps served in various financial management capacities with Hadson
Corporation (an energy company) from February 1986 through June 1995 and was
Executive Vice President and Chief Financial Officer from May 1991 through June
1995. In October 1992, Hadson Corporation filed for protection under Chapter 11
of the Federal Bankruptcy Code. Hadson Corporation's plan of reorganization was
confirmed in November 1992. Mr. Capps is a certified public accountant.
Martin A. Piccolo became the Controller of the Company in May 1995 upon the
closing of the Company's acquisition of Dynamex Express, where he also served in
such capacity. He was elected as Secretary of the Company in September 1995 and
also served as its Treasurer from September 1995 through January 1996. Mr.
Piccolo joined Dynamex Express in January 1989 and has over 15 years experience
in the courier industry.
37
<PAGE> 40
James R. Aitken has served as the General Manager -- Eastern Canada since
February 1996. He joined the Company in May 1995 in conjunction with the
Company's acquisition of Dynamex Express. Prior to joining the Company, Mr.
Aitken was the Director of Sales and Marketing with Dynamex Express, where he
was employed from 1988 to May 1995. During his employment with Dynamex Express,
Mr. Aitken worked in sales and marketing, regional and branch management and
client development. Mr. Aitken has over 17 years of experience in the courier
industry.
Catherine J. Taylor has served as the General Manager -- Midwestern Canada
since May 1996. She joined the Company in August 1995 as Sales
Manager -- Eastern Canada. Prior to joining the Company, Mrs. Taylor was
employed by The Swift Transportation Group from 1982 where she held various
management and supervisory positions. Ms. Taylor has over 14 years of experience
in the courier industry.
Ralph Embree has served as the General Manager -- Eastern U.S. since
February 1996. He joined the Company in December 1995 in conjunction with the
Company's acquisition of Mayne Nickless. Prior to joining the Company, Mr.
Embree held a variety of operations, sales and management positions with Mayne
Nickless where he was employed for seven years. Mr. Embree has over 17 years of
experience in the courier industry.
Thomas R. Stotler has served as the General Manager -- Western U.S. since
February 1996. He joined the Company in December 1995 in conjunction with the
Company's acquisition of Mayne Nickless. Prior to joining the Company, Mr.
Stotler was employed by Mayne Nickless for over eight years as a branch manager
and regional operations manager. Mr. Stotler has over 18 years of experience in
the courier industry.
James M. Hoak has served as a director of the Company since February 1996.
Mr. Hoak founded Heritage Communications, Inc. (a diversified communications
company) in 1971 and served as its Chief Executive Officer until 1991. From 1991
to 1995, Mr. Hoak served as Chairman and Chief Executive Officer of Crown Media,
Inc. (a cable television company). Mr. Hoak has served as Chairman of the Board
of Heritage Media Corporation (a company engaged in targeted marketing services
and broadcasting) since its inception in 1987. Mr. Hoak has served as the
Chairman of the general partner of Cypress from its inception in 1992 and as the
Chairman of Hoak Capital Corporation (a private investment company) since its
inception in 1991. Since 1995, Mr. Hoak has served as the Chairman and President
of James M. Hoak & Co. (a financial services company) and as Chairman of Hoak
Securities Corp. (an investment banker, securities broker-dealer and one of the
Representatives). Mr. Hoak is a director of Airgas, Inc., MidAmerican Energy
Company, Pier 1 Imports, Inc. and Texas Industries, Inc. See "Certain
Transactions" and "Underwriting."
Stephen P. Smiley has served as a director of the Company since 1993 and
was a Vice President of the Company from December 1995 through February 1996.
Mr. Smiley was President of Hoak Capital Corporation from 1991 through February
1996 and served as President of the general partner of Cypress from its
inception in 1992 through January 1996. Mr. Smiley has been Executive Vice
President of Hunt Financial Corp. (a private investment company) since February
1996. Mr. Smiley is also a director of Sun Coast Industries, Inc. (a plastics
manufacturer).
Wayne Kern has served as a director of the Company since February 1996. Mr.
Kern has been the President of Hoak Securities Corp. since its inception in
1995. Mr. Kern has served as Senior Vice President and Secretary of Heritage
Media Corporation since 1987. From 1991 to 1995, Mr. Kern also served as
Executive Vice President of Crown Media, Inc. From 1979 to 1991, Mr. Kern served
as the Executive or Senior Vice President, General Counsel and Secretary of
Heritage Communications, Inc.
Brian J. Hughes has served as a director of the Company since May 1995. Mr.
Hughes has served as the Vice President -- Investments of both Preferred Risk
Life Insurance Company and Preferred Risk Mutual Insurance Company since
September 1992. Mr. Hughes has been a member of the Advisory Board of Cypress
since March 1993. From 1986 to 1992, Mr. Hughes served as Assistant Vice
President -- Investments at Boatmen's National Bank.
Kenneth H. Bishop is a nominee to become a director of the Company upon the
closing of the Offering. From 1974 to the present, Mr. Bishop has been President
and General Manager of Zipper Transportation Services, Ltd., a same-day delivery
business in Winnipeg, Manitoba. See "Business -- Pending Acquisitions."
38
<PAGE> 41
E. T. Whalen is a nominee to become a director of the Company upon the
closing of the Offering. Mr. Whalen is currently a consultant to Gateway Freight
Services, an entity providing freight forwarding services to major international
airlines. From 1965 until January 1996 Mr. Whalen was employed by Japan Airlines
in various management positions, including Staff Vice President-Cargo from
October 1986.
BOARD OF DIRECTORS
Upon the consummation of the Offering, the Board of Directors of the
Company will consist of seven members. Each director will hold office until the
annual meeting of the stockholders of the Company next following his election,
and until his successor is elected and qualified. The holders of a majority of
the outstanding shares of Common Stock present and entitled to vote at a meeting
of stockholders are entitled to elect all of the directors.
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company will receive an annual fee of $6,000 as compensation for his or her
services as a member of the Board of Directors. Non-employee directors will
receive an additional fee of $500 for each meeting of the Board of Directors
attended in person by such director and $250 for each telephonic meeting in
which such director participates. Non-employee directors who serve on a
committee of the Board of Directors will receive $500 for each committee meeting
attended in person and $250 for each telephonic committee meeting in which such
director participates. All directors of the Company are reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or committees thereof, and for other expenses incurred in their capacities as
directors of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established two committees: a Compensation
Committee and an Audit Committee. Each of these committees has two or more
members who serve at the discretion of the Board of Directors. The Compensation
Committee is responsible for reviewing and making recommendations to the Board
of Directors with respect to compensation of executive officers, other
compensation matters and awards under the Company's stock option plan. The Audit
Committee is responsible for reviewing the Company's financial statements, audit
reports, internal financial controls and the services performed by the Company's
independent public accountants, and for making recommendations with respect to
those matters to the Board of Directors.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the total annual
compensation paid or accrued by the Company to or for the account of the Chief
Executive Officer and the other executive officer of the Company whose total
cash compensation for the fiscal year ended July 31, 1995 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL -------------
COMPENSATION SECURITIES
---------------- UNDERLYING
NAME AND FISCAL SALARY BONUS OPTIONS
PRINCIPAL POSITION YEAR ($) ($) (#)
- -------------------------------------------------------- ------ ------- ----- -------------
<S> <C> <C> <C> <C>
Richard K. McClelland(1)
President and Chief Executive Officer................. 1995 22,050 -- 103,000
George M. Siegel(2)
Former Vice Chairman.................................. 1995 120,000 -- --
</TABLE>
- ---------------
(1) Mr. McClelland was employed by the Company as of May 31, 1995, the date of
the Company's acquisition of Dynamex Express. Consequently, Mr. McClelland's
salary for fiscal year 1995 as set forth above represents only two months of
his annual salary. Had Mr. McClelland been employed for the entire twelve
months of fiscal year 1995, his salary for such year would have been
approximately $132,300.
(2) Mr. Siegel, a founder of the Company, resigned in July 1995.
39
<PAGE> 42
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into an employment agreement with Mr. McClelland.
Such agreement provides for the payment of a base salary in the annual amount of
$200,000, participation in an executive bonus plan, an auto allowance of
approximately Cdn $900 per month and participation in other employee benefit
plans. The agreement also provides that upon Mr. McClelland's exercise of
certain stock options to purchase 48,000 shares of Common Stock, the Company
shall pay Mr. McClelland a bonus equal to the exercise price multiplied by the
number of shares to be purchased by virtue of such exercise. Unless terminated
earlier, the employment agreement shall continue until May 31, 2000, upon which
date, such agreement will be automatically extended for successive one-year
renewal terms unless the Company gives Mr. McClelland notice upon the terms
provided in such agreement. Additionally, upon a sale or transfer of
substantially all of the assets of the Company or certain other events that
constitute a change of control of the Company, including the acquisition by a
stockholder other than certain named stockholders of securities representing 15%
of the votes that may be cast for director elections, the Company or its
successor, as the case may be, shall continue to pay Mr. McClelland the
compensation set forth in such agreement for the greater of two years from the
date of such change of control or the remainder of the term of the agreement.
The Company has entered into a consulting agreement with Mr. Siegel which
provides for the payment of a consulting fee in the amount of $120,000 per year,
an auto allowance of $500 per month and participation in certain employee
benefit plans. The term expires on November 16, 1998. The Company is required to
pay the consulting fee to Mr. Siegel or his designated beneficiary for the three
month period following Mr. Siegel's death or total disability, provided that the
Company may offset any such amounts against any indebtedness that Mr. Siegel
owes to the Company at the time of such termination. See "Certain Transactions."
STOCK OPTION PLAN
The Company maintains the Dynamex Inc. 1996 Stock Option Plan (the "Option
Plan") which provides for the grant of options to eligible employees and
directors for the purchase of Common Stock of the Company. The Option Plan
covers, in the aggregate, a maximum of 630,000 shares of Common Stock. The
Option Plan provides for the granting of both incentive stock options (as
defined in Section 422A of the Internal Revenue Code of 1986) and nonqualified
stock options (options which do not meet the requirements of Section 422A). In
addition, the Option Plan provides for the granting of restricted stock, which
may include, without limitation, restrictions on the right to vote such shares
and restrictions on the right to receive dividends on such shares. The grant of
options to purchase such restricted stock may be based upon the attainment of
performance goals prescribed by the Compensation Committee of the Board of
Directors (the "Committee"). Under the Option Plan, the exercise price may not
be less than the fair market value of the Common Stock on the date of the grant
of the option.
The Committee administers and interprets the Option Plan and is authorized
to grant options thereunder to all eligible employees of the Company, including
officers. The Committee designates the optionees, the number of shares subject
to the options and the terms and conditions of each option. Options under the
Option Plan generally vest over a five year period. Certain changes in control
of the Company will cause the options to vest immediately. Each option granted
under the Option Plan must be exercised, if at all, during a period established
in the grant which may not exceed 10 years from the date of grant. An optionee
may not transfer or assign any option granted and may not exercise any options
after a specified period subsequent to the termination of the optionee's
employment with the Company.
Non-employee members of the Board of Directors will receive annual grants
of options under the Option Plan. The initial grant to such directors shall
consist of options to purchase 2,000 shares of Common Stock at fair market value
and shall be granted upon the later of (i) the closing of the Offering or (ii)
the date such director is initially elected. Thereafter, on the anniversary of
the initial grant, options to purchase 2,000 shares of Common Stock at the then
fair market value will be automatically granted to each director then serving.
Such options will be immediately vested in full. Each option granted to
directors under the Option Plan must be exercised, if at all, during a period
established in the grant, which may not exceed 10 years from the date of grant.
An optionee may not transfer or assign any options granted and may not exercise
any options after a
40
<PAGE> 43
specified period subsequent to the termination of the optionee's service on the
Board of Directors. Any options granted to an optionee will immediately
terminate upon removal of such optionee from the Board of Directors for cause.
Upon completion of the Offering, options to purchase 473,384 shares will be
outstanding and (i) 214,384 of these options have a weighted average exercise
price of $3.84 per share and expire between November 2003 and July 2005 and (ii)
259,000 of these options (which will be granted in connection with the Offering
and are exercisable at the initial public offering price) expire in July 2006
(99,000 of which will be granted to Mr. McClelland). A total of 156,616 shares
remained available for future grants under the Option Plan.
OPTION GRANTS
The following table sets forth, as to each executive officer named in the
Summary Compensation Table above, the number of shares of Common Stock subject
to options granted during the year ended July 31, 1995 and the per share
exercise price for such options.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK
NUMBER OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS EXERCISE OR FOR OPTION
UNDERLYING GRANTED TO BASE TERM($)(3)
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------
NAME GRANTED(1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ------------------------------ ----------- -------------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard K. McClelland......... 103,000(2) 74% $4.25 5/31/2005 275,000 697,310
George M. Siegel.............. -- -- -- -- -- --
</TABLE>
- ---------------
(1) All options were granted under the Option Plan.
(2) Includes options to acquire 48,000 shares of Common Stock which are
immediately exercisable and were granted to Mr. McClelland pursuant to his
employment agreement with the Company. Under such employment agreement, at
the time of Mr. McClelland's exercise of all or any of these options, the
Company has agreed to pay Mr. McClelland a cash bonus equal to the exercise
price multiplied by the number of shares to be purchased by virtue of such
exercise. Also includes options to acquire 11,000 shares of Common Stock
that became exercisable on May 31,1996 as the first tranche of a five year
vesting schedule and options to acquire 44,000 shares of Common Stock which
will vest ratably over the remaining four years of such vesting schedule,
with 25% of the balance becoming exercisable on each May 31, 1997, 1998,
1999 and 2000.
(3) The amounts shown as potential realizable values are based on assumed
annualized rates of appreciation in the price of Common Stock of five
percent and ten percent over the term of the options, as set forth in the
rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent upon the future performance of the
Common Stock. There can be no assurance that the potential realizable values
reflected in this table will be achieved.
41
<PAGE> 44
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the unexercised
options to purchase shares of the Company's Common Stock granted under the
Option Plan to the executive officers and held by them at July 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
AS OF JULY 31, 1995
---------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard K. McClelland....................... 48,000 55,000 $ 324,000(2) $ 371,250
George M. Siegel............................ 34,954 52,430 271,243 406,857
</TABLE>
- ---------------
(1) Based on an assumed initial public offering price of $11.00 per share, less
the exercise price payable for such shares.
(2) Does not give effect to the Company's agreement to pay a cash bonus to Mr.
McClelland upon his exercise of his option to purchase all or any of these
48,000 shares of Common Stock equal to the exercise price multiplied by the
number of shares to be purchased by virtue of such exercise.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors consists of
two members, Messrs. Smiley and Hughes. Mr. Bishop, a nominee for director, will
become a member of the Compensation Committee concurrently with his election to
the Board of Directors upon the completion of the Offering. No member of the
Committee was at any time during the fiscal year ended July 31, 1995 an officer
or employee of the Company. Mr. Smiley was a Vice President of the Company from
December 1995 through February 1996. No executive officer of the Company serves
as a member of the board of directors or compensation committee of any entity
which has one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Restated Certificate of Incorporation limits the liability of
directors of the Company to the Company or its stockholders to the fullest
extent permitted by Delaware General Corporation Law (the "DGCL"). Accordingly,
pursuant to the terms of the DGCL presently in effect, the Company's directors
will not be liable to the Company or its stockholders for monetary damages for
breach of the directors' fiduciary duty as a director, except for liability (i)
for any breach of the directors' duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases or (iv)
for any transaction from which the director derived an improper personal
benefit. The effect of these provisions will be to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from grossly
negligent behavior), except in the situations described above. These provisions
will not limit the liability of directors under federal securities laws. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify each of its
directors and officers, acting in such capacity, so long as such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Company. Such indemnification may be made only upon
a determination by the Board of Directors that such indemnification is proper in
the circumstances because the person to be indemnified has met the applicable
standard of conduct to permit indemnification
42
<PAGE> 45
under the law. The Company is also required to advance to such persons payment
for their expenses incurred in defending a proceeding to which indemnification
might apply, provided the recipient provides an undertaking agreeing to repay
all such advanced amounts if it is ultimately determined that he is not entitled
to be indemnified.
The Company has also entered into indemnification agreements with each of
its directors and certain of its executive officers. Pursuant to these
agreements, the Company is obligated, to the extent permitted by law, to
indemnify these persons against all expenses, judgments, fines and penalties
incurred in connection with the defense or settlement of any actions brought
against them by reason of the fact that they are or were directors or officers
of the Company or that they are or were serving at the request of the Company as
an officer or director of another corporation or enterprise, except that if the
acts of such an indemnitee are found by a court of proper jurisdiction to be
intentional or willful, the Company will not be liable to indemnify such
indemnitee.
As of this date hereof, there is no pending litigation or proceeding
involving a director, officer, employee or agent of the Company where
indemnification will be required or permitted, and the Company is not aware of
any threatened litigation or proceeding which may result in a claim for such
indemnification.
CERTAIN TRANSACTIONS
In private placements of the Company's securities conducted from November
16, 1993 through May 31, 1995, Cypress, which was not affiliated with the
Company prior to its initial investment in November 1993, acquired an aggregate
of 2,021,752 shares of Common Stock (after giving effect to the May 1995
conversion of the Company's convertible preferred stock held by Cypress) for
aggregate consideration of approximately $7.0 million, including interest and
dividends accrued on such preferred stock. James M. Hoak, a director of the
Company, is the Chairman and sole stockholder of the general partner of Cypress
and such general partner owns a 5% partnership interest in Cypress.
Additionally, Mr. Hoak is a limited partner owning a 45% interest in Cypress.
In December 1995, in connection with the acquisition of Mayne Nickless, the
Company issued $4.5 million of Bridge Notes including (i) $1.0 million to
Cypress, (ii) an aggregate of approximately $1.8 million to various limited
partners of Cypress (including Preferred Risk Mutual Insurance Company and
Preferred Risk Life Insurance Company (each a stockholder of the Company and an
employer of Brian J. Hughes, a director of the Company) and Stephen P. Smiley (a
director of the Company) and certain affiliates of Cypress' general partner and
(iii) an aggregate of approximately $1.8 million to James M. Hoak and the
general partner of Cypress. The holders of the Bridge Notes received the Bridge
Warrants, which enable the holders to purchase an aggregate of 1,080,000 shares
of Common Stock at a price of $.025 per share, which number of shares will be
reduced to 540,000 in the event that the Company has redeemed the Bridge Notes
by June 30, 1996, which date shall be extended to a date not later than December
31, 1996 if the Company is actively engaged in the initial public offering
process during such time. The shares of Common Stock and the Bridge Warrant held
by Cypress have been pledged to the Company's senior lender under the Credit
Agreement. However, the Company intends to use a portion of the proceeds of the
Offering to retire a portion of the outstanding indebtedness under the Credit
Agreement and the lender has agreed to surrender its rights with respect to such
securities upon such repayment. See "Use of Proceeds", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Principal
Stockholders."
To finance his acquisition of Common Stock, George M. Siegel issued to the
Company, (i) a promissory note dated November 16, 1993 in the original principal
amount of $100,000, bearing interest at a rate of 8%, which note has been paid
in full, and (ii) a promissory note dated May 31, 1995, in the original
principal amount of $84,950, bearing interest at a rate of 8%, which note has
been paid in full.
The Company paid Hoak Capital Corporation fees in the aggregate amount of
approximately $146,000 in fiscal 1995 for advisory services rendered in
connection with certain acquisitions and financing arrangements. In January
1996, the Company paid Hoak Securities Corp. a fee of $70,000 for investment
banking services rendered in connection with the Company's acquisition of Mayne
Nickless and $165,000 for the arrangement of bank financing related to that
acquisition.
43
<PAGE> 46
In May 1995, the Company purchased Dynamex Express from Air Canada for
approximately Cdn $10.5 million. Richard K. McClelland, who was the chief
executive officer of Dynamex Express and unaffiliated with the Company at the
time of such transaction, became the chief executive officer and a director of
the Company upon consummation of such transaction.
The Company has entered into an agreement with Kenneth H. Bishop for the
purchase of all of the outstanding stock of Zipper for an aggregate purchase
price of approximately Cdn $2.5 million (approximately $1.8 million, as
converted using an exchange rate of 0.73 U.S. dollars to 1.00 Canadian dollars)
in cash and 41,398 shares of Common Stock (assuming an initial public offering
price of $11.00). In addition, simultaneously with the closing of such
Acquisition, the Company will repay Zipper's bank indebtedness of approximately
Cdn $445,000 (approximately $325,000, as converted using an exchange rate of
0.73 U.S. dollars to 1.00 Canadian dollars). Mr. Bishop has not been affiliated
with the Company prior to the Acquisition and will become a director of the
Company upon the consummation thereof. See "Business -- Pending Acquisitions."
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and affiliates,
will be approved by a majority of the Board of Directors, including a majority
of the independent and disinterested outside directors, and have been and will
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
44
<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of (i) May 31, 1996 and (ii) as
adjusted to reflect (a) the sale of Common Stock being offered by the Company
hereby, (b) the issuance of shares of Common Stock upon the mandatory exercise
of the Bridge Warrants, (c) the issuance of shares of Common Stock as partial
consideration for the Acquisitions, assuming an initial offering price of $11.00
and (d) the issuance of immediately exercisable stock options to non-employee
directors, concurrently with the Offering for (1) each person known by the
Company to own beneficially more than 5% of the Common Stock, (2) each director,
nominee for director and executive officer of the Company and (3) all directors,
nominees for director and executive officers of the Company as a group. Except
pursuant to applicable community property laws and except as otherwise
indicated, each stockholder identified in the table possesses sole voting and
investment power with respect to its or his shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)(2)
------------------------------------------------------
PERCENT
----------------------------------------
NAME NUMBER BEFORE OFFERING(3) AFTER OFFERING(4)
- ------------------------------------------------- --------- ------------------ -----------------
<S> <C> <C> <C>
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS:
Richard K. McClelland............................ 59,000 2.3% *
Robert P. Capps.................................. -- -- --
James M. Hoak(5)(7).............................. 2,353,752 81.8 37.3%
Stephen P. Smiley................................ 4,160 * *
Wayne Kern....................................... 4,640 * *
Brian J. Hughes(6)............................... 2,000 -- *
Kenneth H. Bishop................................ 43,398 -- *
E. T. Whalen..................................... 2,000 -- *
All directors, nominees for director and
executive officers as a group (8
individuals)................................... 2,468,950 82.2 38.7
OTHER 5% STOCKHOLDERS:
Cypress Capital Partners I, L.P.(7).............. 2,141,752 80.4 33.9
One Galleria Tower,
Suite 1650, 13355 Noel Road,
Dallas, Texas 75240
Preferred Risk Mutual Insurance Company(8)....... 336,116 13.0 5.3
111 Ashworth Road
West Des Moines, Iowa 50265
George M. Siegel(9).............................. 257,546 10.0 4.1
</TABLE>
- ---------------
* Indicates less than 1%
(1) Includes shares issuable upon the exercise of stock options outstanding.
(2) Includes shares issuable upon the mandatory exercise of the Bridge Warrants
upon the completion of the Offering.
(3) Based upon 2,543,460 shares of Common Stock outstanding upon the completion
of this Offering, plus shares issuable upon the exercise of options and
Bridge Warrants which are included in the number of shares beneficially
owned by such person.
(4) Based upon 6,309,630 shares of Common Stock outstanding upon the completion
of this Offering, plus shares issuable upon the exercise of options which
are included in the number of shares beneficially owned by such person.
(5) Mr. Hoak's address is One Galleria Tower, Suite 1650, 13355 Noel Road,
Dallas, Texas 75240. Includes 2,141,752 shares owned by Cypress, of which
Mr. Hoak is the Chairman and sole shareholder of its 5% general partner and
a 45% limited partner. Excludes 4,800 shares issuable upon the mandatory
exercise of the Bridge Warrants owned by Mr. Hoak's wife, as to which shares
Mr. Hoak disclaims beneficial ownership.
(6) Excludes 336,116 shares beneficially owned by Preferred Risk Life Insurance
Company and Preferred Risk Mutual Insurance Company, each of which employs
Mr. Hughes as Vice President- Investments. Mr. Hughes disclaims beneficial
ownership of such shares.
(7) Includes 2,141,752 shares beneficially owned by James M. Hoak in his
capacity as the Chairman and sole shareholder of the general partner of
Cypress. The shares and Bridge Warrants held by Cypress have been pledged to
the Company's senior lender under the Credit Agreement. However, the Company
intends to use a portion of the proceeds of the Offering to retire a portion
of the outstanding indebtedness under the Credit Agreement. The lender has
agreed to release the pledge with respect to such securities in the event of
such repayment. See "Use of Proceeds" and "Management 's Discussion and
Analysis of Financial Condition and Results of Operations."
(8) Includes 168,056 shares beneficially owned by its affiliate Preferred Risk
Life Insurance Company.
(9) Mr. Siegel's address is 37801 N. Stirrup Circle, Carefree, Arizona 85377.
Mr. Siegel, founder of the Company, resigned as a director and officer of
the Company in July 1995.
45
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 60,000,000 shares of
capital stock, par value $.01 per share, of which 50,000,000 are Common Stock
and 10,000,000 are Preferred Stock. A total of 500,000 shares of Preferred Stock
have been designated as Series A Junior Participating Preferred Stock (the
"Series A Preferred Stock") by the Board of Directors in connection with the
Rights Agreement discussed below. As of June 30, 1996, there were 2,543,460
shares of Common Stock outstanding held by four holders of record, and there
were no shares of Preferred Stock outstanding.
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Restated Certificate of Incorporation, Bylaws
and Rights Agreement, in each case as amended to date.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, including the election of
directors. The Common Stock does not have cumulative voting rights, which means
that the holders of a majority of the shares voting for election of directors
can elect all members of the Board of Directors. Dividends may be paid ratably
to holders of Common Stock when and if declared by the Board of Directors out of
funds legally available therefor. Upon liquidation or dissolution of the
Company, the holders of Common Stock will be entitled to share ratably in the
assets of the Company legally available for distribution to stockholders after
payment of all liabilities and the liquidation preferences of any outstanding
Preferred Stock.
The holders of Common Stock have no preemptive or conversion rights or
other subscription rights and are not subject to redemption or sinking fund
provisions or to calls or assessments by the Company. The shares of Common Stock
offered hereby will be, when issued and paid for, fully paid and not liable for
call or assessment. The Company has applied for listing of the Common Stock on
the Nasdaq National Market System.
PREFERRED STOCK
Under governing Delaware law and the Company's Restated Certificate of
Incorporation, no action by the Company's stockholders is necessary, and only
action of the Board of Directors is required, to authorize the issuance of any
of the Preferred Stock. The Board of Directors is empowered to establish, and to
designate the name of, each class or series of the Preferred Stock.
Shares of Series A Preferred Stock purchasable upon exercise of the Rights
will not be redeemable. Each share of Series A Preferred Stock will be entitled
to a minimum preferential quarterly dividend payment of $0.25 per share but will
be entitled to an aggregate dividend of 100 times the dividend declared per
share of Common Stock. In the event of liquidation, the holders of the shares of
Series A Preferred Stock will be entitled to a minimum preferential liquidation
payment of $1 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of the shares of Series A Preferred Stock shall be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock, as adjusted to reflect any dividend on the Common Stock payable in
shares of Common Stock or any subdivision, combination or reclassification of
the Common Stock. Each share of Series A Preferred Stock will have 100 votes,
voting together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Series A Preferred Stock will be entitled to receive
100 times the amount received per share of Common Stock. These rights are
protected by customary antidilution provisions.
Although the Company has no present plans to issue additional series of
Preferred Stock (other than shares which may be issued in connection with the
Rights Agreement), such shares may be issued from time to time in one or more
classes or series with such designations, powers, preferences, rights,
qualifications, limitations and restrictions as may be fixed by the Company's
Board of Directors. The Board of Directors, without obtaining stockholder
approval, may issue such shares with voting or conversion rights or both and
46
<PAGE> 49
thereby dilute the voting power and equity of the holders of Common Stock and
adversely affect the market price of such stock.
The existence of authorized Preferred Stock may have the effect of
discouraging an attempt, through acquisition of a substantial number of shares
of Common Stock, to acquire control of the Company with a view to effecting a
change in control of the Company, a merger, sale or exchange of assets or a
similar transaction. The anti-takeover effects of authorized Preferred Stock may
deny stockholders the receipt of a premium on their Common Stock and may also
have a depressive effect on the market price of the Common Stock.
RIGHTS AGREEMENT
In June 1996, the Board of Directors of the Company approved a Rights
Agreement which is designed to protect stockholders should the Company become
the target of coercive and unfair takeover tactics. Pursuant to the Rights
Agreement, the Board of Directors declared a dividend of one preferred stock
purchase right (a "Right") for each outstanding share of Common Stock on May 31,
1996. Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of the Series A Preferred Stock, at a price of $45.00
per one one-hundredth of a share of Series A Preferred Stock, subject to
possible adjustment.
Initially, the Rights are attached to all Common Stock certificates and no
separate Rights certificates exist. Until the Rights become separable as
described below, an additional Right will be issued with every share of newly
issued Common Stock, including the shares of Common Stock issued pursuant to the
Offering. Until a Right is exercised, the holder of a Right will have no rights
as a stockholder of the Company, including the right to vote or to receive
dividends. The Rights will expire on May 31, 2006 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company, in each case as described below.
The Rights will become exercisable and separable from shares of Common
Stock upon the earlier to occur of (i) 10 days after the first public
announcement that a person or group (an "Acquiring Person"), other than the
Company, any subsidiary of the Company or any employee benefit plan of the
Company or Cypress, James M. Hoak (or any affiliates thereof), has become the
beneficial owner of 15% or more of the outstanding shares of Common Stock or
(ii) 10 business days (or such later date as may be determined by action of the
Board of Directors prior to the time any person or group becomes an Acquiring
Person) after the commencement of, or the announcement of an intention to
commence, a tender or exchange offer the consummation of which would result in
any person or group (other than the Company, any subsidiary of the Company or
any employee benefit plan of the Company) becoming the beneficial owner of 15%
or more of such outstanding shares of Common Stock.
In the event that any person or group becomes the beneficial owner of 15%
or more of the shares of Common Stock then outstanding, each registered holder
of a Right will have the right to receive upon exercise of Right at the then
current purchase price of the Right that number of shares of Common Stock of the
Company having a market value of two times such purchase price. Notwithstanding
the foregoing, after the occurrence of the event described in this paragraph,
all Rights which are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by an Acquiring Person will be void. Under
no circumstances may a Right be exercised following the occurrence of a
transaction described in this paragraph prior to the expiration of the Company's
right of redemption.
In the event that, on or after the first public announcement by the Company
or an Acquiring Person that an Acquiring Person has become such (the "Share
Acquisition Date"), the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold or transferred (in one transaction or a series of transactions
other than in the ordinary course of business), each registered holder of a
Right (except Rights which have become void as specified above) will thereafter
have the right to receive, upon the exercise thereof at the then current
purchase price of the Right, the number of shares of common stock of the
acquiring company (or of another person or group affiliated with the Acquiring
Person as provided in the Rights Agreement) which at the time of such
transaction will have a market value of two times such purchase price.
47
<PAGE> 50
At any time after any person becomes an Acquiring Person and prior to the
time such person or group becomes the beneficial owner of 50% or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights which have become void), in whole or in
part, at the exchange rate of one share of Common Stock, or one one-hundredth of
a share of Series A Preferred Stock (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right, subject to adjustment as provided in the Rights Agreement.
At any time prior to the earlier of (i) the 10th business day after the
Share Acquisition Date, subject to one or more extensions by a majority of the
Disinterested Directors (as defined) and (ii) the Final Expiration Date, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a redemption price of $.01 per Right, appropriately adjusted to reflect
any stock split, stock dividend, subdivision or combination or any similar
transaction occurring after the date of the Rights Agreement (the "Redemption
Price"); provided, however, that, under certain circumstances specified in the
Rights Agreement, the Rights may not be redeemed unless there are Disinterested
Directors in office and such redemption is approved by a majority of such
Disinterested Directors. The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion shall establish. After the redemption period has expired,
the Company's right of redemption may be reinstated, under the circumstances
specified in the Rights Agreement, which include the concurrence of a majority
of the Disinterested Directors, if an Acquiring Person shall have reduced to 10%
or less the number of outstanding shares of Common Stock beneficially owned in a
transaction or series of transactions not involving the Company and not
constituting specified transactions which result in a discounted purchase price
under the Rights Agreement. Immediately after any action by the Board of
Directors directing the redemption of the Rights, the right to exercise the
Rights shall terminate and thereafter the registered holders of the Rights shall
be entitled to receive only the Redemption Price per Right.
The term "Disinterested Director" means any member of the Company's Board
of Directors who is unaffiliated with an Acquiring Person and was a member of
the Company's Board of Directors prior to the time that an Acquiring Person
became such and any successor of a Disinterested Director who is unaffiliated
with an Acquiring Person and is recommended to succeed a Disinterested Director
by a majority of Disinterested Directors then on the Company's Board of
Directors.
The Rights have certain anti-takeover effects. The Rights could cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on redemption of the Rights or on substantially
all of the Rights also being acquired. The Rights should not, however, interfere
with any merger or other business combination approved by the Board of Directors
of the Company since the Rights may be redeemed or amended by the Company as
described above.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is a Delaware corporation and is subject to the provisions of
Section 203 of the Delaware General Corporation Law. In general, Section 203
provides that a Delaware corporation may not engage in any of a broad range of
business combinations with a person or affiliate or associate of such person who
is an "interested stockholder" (defined generally as a person who together with
affiliates and associates, own (or within three years, did own) 15% or more of a
corporation's outstanding voting stock) unless: (a) the transaction resulting in
a person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder; (b) the interested stockholder acquires 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder; or (c) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is Harris
Trust and Savings Bank.
48
<PAGE> 51
SHARES ELIGIBLE FOR FUTURE SALE
The Company has outstanding 2,543,460 shares of Common Stock. In addition,
the Company has 473,384 shares reserved for issuance upon exercise of options
granted or to be granted in connection with the Offering under the Company's
Stock Option Plan, 110,754 of which are immediately exercisable, and 540,000
shares reserved for issuance upon the mandatory exercise of the Bridge Warrants
concurrently with the consummation of the Offering. Of the 6,309,630 shares to
be outstanding after the Offering, the 3,100,000 shares sold to the public
hereby will be freely tradeable without restrictions or registration under the
Securities Act, except that any shares purchased by "affiliates" of the Company,
as that term is defined in Rule 144 ("Rule 144") under the Securities Act
("Affiliates") may generally only be sold in compliance with the limitations of
Rule 144 described below. An aggregate of 126,170 shares will be issued in
connection with the Acquisitions. The Company has agreed to register these
shares under the Securities Act within 30 days after the closing of the
Acquisitions in order to permit the resale of such shares in the open market
from time to time and has agreed to maintain the effectiveness of such
registration for two years. Following the sale of such shares pursuant to an
effective registration statement, these shares, other than shares acquired by
Affiliates, shall be freely tradeable. The remaining 3,083,460 shares (including
540,000 shares to be issued upon the mandatory exercise of the Bridge Warrants)
were issued and sold by the Company in private transactions in reliance upon
exemptions from registration under the Securities Act and are, therefore deemed
"restricted securities" under Rule 144 which may not be sold publicly unless the
shares are registered under the Securities Act or are sold under Rule 144 or
another similar exemption. Under Rule 144, substantially all of the remaining
restricted securities will become eligible for resale in accordance with the
terms of Rule 144 90 days after the date the Company becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
In general, under Rule 144 a person (or persons whose sales are aggregated)
who beneficially owns restricted securities for at least two years and any
Affiliate who beneficially owns restricted securities for at least two years or
any other shares not constituting restricted securities without regard to such
two-year holding period, is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of the Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner-of-sale provisions, notice
requirements and the availability of current public information about the
Company. A person who has not been an affiliate of the Company at any time
during the three months preceding a sale, and who beneficially owns shares last
acquired from the Company or an affiliate of the Company at least three years
previously is entitled to sell all such shares under Rule 144 without regard to
any of the limitations of the Rule.
After the Offering, under the terms of agreements between the Company and
its principal stockholders entered into in connection with the issuance of the
Company's equity securities, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other stock holders exercising registration rights, such holders are
entitled to notice of such registration and are entitled to include certain
shares of Common Stock therein. In addition, Cypress may require the Company on
a date after the sixth month anniversary of the Offering to file a registration
statement under the Securities Act at the Company's expense with respect to the
resale from time to time of its shares of Common Stock. If Cypress exercises
this right, the Company would be required to use its best efforts to effect such
registration, subject to certain conditions and limitations. These rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in any such
registration. To the extent their shares of Common Stock are not offered hereby,
the holders of these registration rights have waived such rights in regard to
the Offering.
The Company, the Company's executive officers and directors, previous
owners of the Acquired Companies to whom shares of Common Stock are being issued
in connection with the Acquisitions, and stockholders of the Company that own 1%
or more of the Common Stock outstanding prior to the Offering have agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
or any securities exercisable for or convertible into Common Stock for a period
of 180 days after the date of this Prospectus without the prior written consent
of William Blair & Company, L.L.C.
49
<PAGE> 52
The Company cannot predict the effect, if any, that sales of restricted
securities or the availability of such securities for sale could have on the
market price, if any, prevailing from time to time. Nevertheless, sales of
substantial amounts of the Company's securities, including the securities
offered hereby, could adversely affect prevailing market prices of the Company's
securities and the Company's ability to raise additional capital by occurring at
a time when it would be beneficial for the Company to sell securities.
Upon the expiration of the 180-day period described above, certain shares
issued or issuable upon the exercise of options granted prior to the date of
this Prospectus also may be issuable for sale in the public market pursuant to
Rule 701 under the Securities Act. In general, Rule 701 permits resales of
shares issued pursuant to certain compensatory benefit plans and contracts
commencing at the end of the 90 day period after the Company becomes subject to
the reporting requirements of the Exchange Act. If all of the requirements of
Rule 701 are satisfied, and upon completion of the 180-day period, an additional
105,924 shares of Common Stock issuable upon the exercise of currently
outstanding options or options to be granted in connection with the Offering
which are immediately exercisable will be eligible for sale.
The Company intends to file a registration statement under the Securities
Act to register all shares of Common Stock issuable pursuant to the Option Plan.
See "Management -- Stock Option Plan." Subject to the completion of the 180-day
period described above, shares of Common Stock issued after the effective date
of such registration statement upon the exercise of awards issued under such
plan generally will be eligible for sale in the public market.
50
<PAGE> 53
UNDERWRITING
The several underwriters named below (the "Underwriters"), for whom William
Blair & Company, L.L.C. and Hoak Securities Corp. are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions set forth in the underwriting agreement by and among the Company and
the Representatives (the "Underwriting Agreement"), to purchase from the
Company, and the Company has agreed to sell to the Underwriters, the respective
number of shares of Common Stock (excluding the over-allotment shares) set forth
opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------------------------------------------------------------ ---------
<S> <C>
William Blair & Company, L.L.C. ..................................
Hoak Securities Corp. ............................................
---------
Total........................................................ 3,100,000
=========
</TABLE>
The nature of the Underwriters' obligations under the Underwriting
Agreement is such that all shares of Common Stock being offered, excluding
shares covered by the over-allotment option granted to the Underwriters, must be
purchased if any are purchased. In the event of a default by any Underwriter,
the Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the nondefaulting Underwriters pertaining to the Underwriting
Agreement may be increased or such Underwriting Agreement may be terminated.
The Representatives have advised the Company that they propose to offer the
shares of Common Stock directly to the public initially at the public offering
price set forth on the cover page of this Prospectus and to selected dealers at
such price less a concession of not more than $ per share. Additionally, the
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the initial public offering
of the Common Stock, the public offering price and other selling terms may be
changed by the Representatives.
The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 465,000
shares of Common Stock at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any of such additional shares pursuant to this option, each Underwriter will be
committed to purchase such additional shares in approximately the same
proportion as set forth in the table above. The Underwriters may exercise the
option only for the purpose of covering over-allotments, if any, made in
connection with the distribution of the shares of Common Stock offered hereby.
The Company, the Company's directors and officers, certain stockholders of
the Company and the stockholders of Acquired Companies to whom shares of Common
Stock are being issued have agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities exercisable
for or convertible into Common Stock for a period of 180 days after the
effective date of the Registration Statement of which this Prospectus is a part
without the written consent of William Blair & Company, L.L.C., except for the
shares of Common Stock offered hereby and the sale of shares pursuant to the
over-allotment option. See "Shares Eligible for Future Sale."
There has been no public market for the shares of Common Stock prior to
this Offering. The initial public offering price for the Common Stock will be
determined by negotiations among the Company and the Representatives. Among the
factors to be considered in determining the initial public offering price are
prevailing market and economic conditions, revenues and earnings of the Company,
estimates of the
51
<PAGE> 54
Company's business potential and prospects, the present state earnings of the
Company's business operations, an assessment of the Company's management and the
consideration of the above factors in relation to the market valuations of
companies in related businesses.
The Representatives have informed the Company that the Underwriters will
not confirm, without customer authorization, sales to their customer accounts as
to which they have discretionary authority.
The Company has agreed to indemnify the Underwriters and their controlling
persons against certain liabilities, including liabilities under the Securities
Act, or to contribute to payments the Underwriters may be required to make in
respect thereof.
James M. Hoak and Wayne Kern, directors of the Company, are the Chairman
and President, respectively, of Hoak Securities Corp., one of the
Representatives. Both Hoak Securities Corp. and the general partner of Cypress
are wholly-owned by Mr. Hoak. In addition, Mr. Hoak owns a 45% limited
partnership interest in Cypress. Accordingly, Hoak Securities Corp. is deemed to
be an affiliate of the Company for purposes of the NASD Conduct Rules. The
Company intends to use a portion of the net proceeds of this Offering to prepay
$4.5 million principal amount of indebtedness owed under the Bridge Facility to
Cypress, various limited partners of Cypress and certain affiliates of Cypress'
general partner. See "Use of Proceeds," "Management," "Certain Transactions" and
"Principal Stockholders."
As members of the National Association of Securities Dealers, Inc.
("NASD"), William Blair & Company, L.L.C. and Hoak Securities Corp. are
underwriting this Offering in compliance with the applicable provisions of
Section 2720 of the NASD Conduct Rules. In connection therewith, William Blair &
Company, L.L.C. is acting as a qualified independent underwriter for purposes of
determining the initial public offering price per share of Common Stock. In its
role as a qualified independent underwriter, William Blair & Company, L.L.C. has
performed a due diligence investigation and reviewed and participated in the
preparation of this Prospectus and the Registration Statement of which this
Prospectus is a part. The initial public offering price set forth on the cover
page of this Prospectus is no higher than the price recommended by William Blair
& Company, L.L.C.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Crouch & Hallett, L.L.P., Dallas, Texas. Bruce H. Hallett, a partner
of Crouch & Hallett, L.L.P., is a limited partner in Cypress and beneficially
owns less than 1% of the Bridge Warrants, Bridge Notes and Common Stock of the
Company. Certain legal matters related to the Offering will be passed on for the
Underwriters by Sonnenschein Nath & Rosenthal, Chicago, Illinois.
EXPERTS
The (i) consolidated financial statements of Dynamex Inc. and subsidiaries
as of July 31, 1994 and 1995 and April 30, 1996 and for each of the years in the
three-year period ended July 31, 1995 and for the nine months ended April 30,
1996, (ii) the statement of operations and changes in financial position of
Dynamex Express Inc. for the five months ended May 31, 1995, (iii) the financial
statements of each of K.H.B. & Associates Ltd., Action Delivery and Messenger
Service Limited, Southbank Courier, Inc. and Seko Enterprises, Inc. and Related
Companies as of December 31, 1995 and 1994 and for each of the years in the two
year period ended December 13, 1995 have been audited by Deloitte & Touche,
independent auditors, as stated in their reports appearing herein and elsewhere
in this Registration Statement. Such financial statements are included herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
The (i) combined financial statements of Seidel Delivery for the years
ended December 31, 1994 and 1995 and (ii) the combined statements of operations
and cash flows of Mayne Nickless Courier (a wholly owned business of Mayne
Nickless Transport, North America until December 28, 1995) for the six months
ended December 28, 1995 and each of the three fiscal years in the period ended
July 2, 1995 included in this Prospectus have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports
52
<PAGE> 55
herein (which report on the combined statements of operations and cash flows of
Mayne Nickless Courier expresses an unqualified opinion and includes an
explanatory paragraph referring to Mayne Nickless Courier's basis of
presentation), and have been so included in reliance upon the reports of such
firm given upon their authority as experts on accounting and auditing.
The statements of operations and changes in financial position of Dynamex
Express Inc. for each of the three years in the period ended December 31, 1994
have been audited by Price Waterhouse, independent auditors, as stated in their
reports appearing herein and elsewhere in this Registration Statement. Such
financial statements have been included herein and elsewhere in this
Registration Statement in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus, which is a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
the Company and the Common Stock, reference is hereby made to such Registration
Statement and the exhibits and schedules thereto, copies of which may be
inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street N.W., Washington, D.C. 20549, and at its regional offices at 7 World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2551. Copies of such materials may also
be obtained from the Public Reference Section of the Securities and Exchange
Commission, Washington, D.C. 20549, upon payment of the fees prescribed by the
Securities and Exchange Commission. The summaries in this Prospectus of
additional information included in the Registration Statement or any exhibit
thereto are qualified in their entirety by reference to such information or
exhibit.
53
<PAGE> 56
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DYNAMEX INC. AND SUBSIDIARIES
Independent Auditors' Report........................................................ F-3
Consolidated Balance Sheets, July 31, 1994 and 1995 and April 30, 1996.............. F-4
Consolidated Statements of Operations for each of the years in the three-year period
ended July 31, 1995 and for the nine months ended April 30, 1995 (unaudited) and
April 30, 1996................................................................... F-5
Consolidated Statements of Shareholders' Equity for the three years ended July 31,
1995 and for the nine months ended April 30, 1996................................ F-6
Consolidated Statements of Cash Flows for each of the years in the three-year period
ended July 31, 1995 and for the nine months ended April 30, 1995 (unaudited) and
April 30, 1996................................................................... F-7
Notes to the Consolidated Financial Statements...................................... F-8
DYNAMEX EXPRESS INC.
Independent Auditors' Report........................................................ F-16
Statement of Operations for the five months ended May 31, 1995...................... F-17
Statement of Changes in Financial Position for the five months ended May 31, 1995... F-18
Notes to the Financial Statements................................................... F-19
Independent Auditors' Report........................................................ F-21
Statements of Operations for each of the years in the three-year period ended
December 31, 1994................................................................ F-22
Statements of Changes in Financial Position for each of the years in the three-year
period ended December 31, 1994................................................... F-23
Notes to the Financial Statements................................................... F-24
Pro Forma Statement of Operations for the 10 months ended May 31, 1995.............. F-27
</TABLE>
<TABLE>
<S> <C>
MAYNE NICKLESS COURIER
Independent Auditors' Report........................................................ F-28
Combined Statements of Operations for each of the fiscal years in the three-year
period ended July 2, 1995 and for the six months ended December 31, 1994
(unaudited) and December 28, 1995................................................ F-29
Combined Statements of Cash Flows for each of the fiscal years in the three-year
period ended July 2, 1995 and for the six months ended December 31, 1994
(unaudited) and December 28, 1995................................................ F-30
Notes to the Combined Financial Statements.......................................... F-31
ACQUIRED COMPANIES
Introduction to Pro Forma Combined Financial Statements............................. F-34
Pro Forma Combined Balance Sheet, March 31, 1996 (unaudited)........................ F-35
Pro Forma Combined Statement of Operations for the nine months ended March 31, 1996
(unaudited)...................................................................... F-36
Pro Forma Combined Statement of Operations for the year ended June 30, 1995
(unaudited)...................................................................... F-37
Pro Forma Combined Statement of Operations for the year ended December 31, 1995
(unaudited)...................................................................... F-38
Pro Forma Combined Statement of Operations for the three months ended March 31, 1996
(unaudited)...................................................................... F-39
Notes to the Pro Forma Combined Financial Statements (unaudited).................... F-40
K.H.B. & ASSOCIATES LTD. (A.K.A. ZIPPER TRANSPORTATION SERVICES LTD.)
Independent Auditors' Report........................................................ F-41
Consolidated Balance Sheets, December 31, 1994 and 1995 and March 31, 1996
(unaudited)...................................................................... F-42
Consolidated Statements of Operations and Retained Earnings for the years ended
December 31, 1994 and 1995 and for the three months ended March 31, 1995
(unaudited) and 1996 (unaudited)................................................. F-43
Consolidated Statements of Changes in Financial Position for the years ended
December 31, 1994 and 1995 and for the three months ended March 31, 1995
(unaudited) and 1996 (unaudited)................................................. F-44
Notes to the Consolidated Financial Statements...................................... F-45
</TABLE>
F-1
<PAGE> 57
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ACTION DELIVERY AND MESSENGER SERVICE LIMITED
Independent Auditors' Report........................................................ F-49
Consolidated Balance Sheets, December 31, 1994 and 1995 and March 31, 1996
(unaudited)...................................................................... F-50
Consolidated Statements of Operations and Retained Earnings for the years ended
December 31, 1994 and 1995 and for the three months ended March 31, 1995
(unaudited) and 1996 (unaudited)................................................. F-51
Consolidated Statements of Changes in Financial Position for the years ended
December 31, 1994 and 1995 and for the three months ended March 31, 1995
(unaudited) and 1996 (unaudited)................................................. F-52
Notes to the Consolidated Financial Statements...................................... F-53
SOUTHBANK COURIER, INC.
Independent Auditors' Report........................................................ F-56
Consolidated Balance Sheets, December 31, 1994 and 1995 and March 31, 1996
(unaudited)...................................................................... F-57
Consolidated Statements of Operations and Retained Earnings for the years ended
December 31, 1994 and 1995 and for the three months ended March 31, 1995
(unaudited) and 1996 (unaudited)................................................. F-58
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1995
and for the three months ended March 31, 1995 (unaudited) and 1996 (unaudited)... F-59
Notes to the Consolidated Financial Statements...................................... F-60
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
Independent Auditors' Report........................................................ F-62
Combined Balance Sheets, December 31, 1994 and 1995 and March 31, 1996
(unaudited)...................................................................... F-63
Combined Statements of Income and Retained Earnings for the years ended December 31,
1994 and 1995 and for the three months ended March 31, 1995 (unaudited) and 1996
(unaudited)...................................................................... F-64
Combined Statements of Cash Flows for the years ended December 31, 1994 and 1995 and
for the three months ended March 31, 1995 (unaudited) and 1996 (unaudited)....... F-65
Notes to the Combined Financial Statements.......................................... F-66
SEIDEL DELIVERY
Independent Auditors' Report........................................................ F-71
Combined Balance Sheets, December 31, 1994 and 1995 and March 31, 1996
(unaudited)...................................................................... F-72
Combined Statements of Income and Retained Earnings for the years ended December 31,
1994 and 1995 and for the three months ended March 31, 1995 (unaudited) and 1996
(unaudited)...................................................................... F-73
Combined Statements of Cash Flows for the years ended December 31, 1994 and 1995 and
for the three months ended March 31, 1995 (unaudited) and 1996 (unaudited)....... F-74
Notes to the Combined Financial Statements.......................................... F-75
</TABLE>
F-2
<PAGE> 58
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Dynamex Inc.
We have audited the accompanying consolidated balance sheets of Dynamex
Inc. (formerly Parcelway Systems Holding Corp.) and subsidiaries as of July 31,
1994 and 1995 and April 30, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in the
three year period ended July 31, 1995 and for the nine months ended April 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Dynamex Inc. and subsidiaries
as of July 31, 1994 and 1995 and April 30, 1996, and the results of their
operations and their cash flows for each of the years in the three year period
ended July 31, 1995 and for the nine months ended April 30, 1996, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE
Toronto, Ontario
May 30, 1996, except for Note 13,
as to which the date is June 3, 1996.
F-3
<PAGE> 59
DYNAMEX INC. (FORMERLY PARCELWAY SYSTEMS HOLDING CORP.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 31 APRIL
------------------ 30
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents.................................... $ 865 $ 506 $ 516
Accounts receivable (net of allowance for doubtful accounts
of $76, $122 and $184 at July 31, 1994 and 1995 and April
30, 1996, respectively)................................... 2,298 7,208 10,768
Prepaid and other current assets............................. 221 390 479
------ ------- -------
3,384 8,104 11,763
PROPERTY AND EQUIPMENT -- net (Note 4)......................... 817 1,519 1,990
INTANGIBLES -- net (Note 3).................................... 3,889 7,194 17,867
DEFERRED OFFERING EXPENSES..................................... -- -- 370
OTHER ASSETS................................................... 44 377 997
------ ------- -------
$8,134 $17,194 $32,987
====== ======= =======
LIABILITIES
CURRENT
Line of credit............................................... $ 522 $ 2,686 $ --
Accounts payable trade....................................... 197 481 986
Accrued liabilities
Broker commissions........................................ 279 808 1,471
Wages..................................................... 46 177 884
Outside transportation.................................... 67 85 386
Other..................................................... 505 1,859 2,692
Dividends payable............................................ 299 -- --
Current portion of long-term debt (Note 5)................... 831 524 2,044
------ ------- -------
2,746 6,620 8,463
LONG-TERM DEBT (Note 5)........................................ 1,999 5,924 18,866
------ ------- -------
4,745 12,544 27,329
------ ------- -------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY
Preferred stock; 10,000,000 shares authorized; none
outstanding............................................. 3 -- --
Common stock; 50,000,000 shares authorized; 2,543,460
shares outstanding (Notes 10 and 13).................... 5 25 25
Stock warrants (Note 5)................................... -- -- 624
Additional paid-in capital................................ 5,453 8,756 8,756
Accumulated deficit....................................... (2,072) (4,138) (3,749)
Unrealized foreign currency translation adjustment (Note
8)...................................................... -- 7 2
------ ------- -------
3,389 4,650 5,658
------ ------- -------
$8,134 $17,194 $32,987
====== ======= =======
</TABLE>
See accompanying notes to the consolidated financial statements
F-4
<PAGE> 60
DYNAMEX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
JULY 31 APRIL 30
---------------------------- ----------------------
1993 1994 1995 1996
------ ------- ------- 1995 -------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES........................................ $ 728 $ 7,023 $21,032 $11,350 $50,015
COST OF SALES................................ 419 5,212 14,336 7,805 35,079
------ ------- ------- ------- -------
GROSS PROFIT................................. 309 1,811 6,696 3,545 14,936
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.................... 752 2,449 7,068 4,227 12,391
DEPRECIATION AND AMORTIZATION................ 54 322 690 509 1,066
------ ------- ------- ------- -------
OPERATING INCOME (LOSS)...................... (497) (960) (1,062) (1,191) 1,479
INTEREST EXPENSE............................. 25 157 403 240 1,079
OTHER (INCOME) EXPENSE....................... (14) (52) 157 -- --
------ ------- ------- ------- -------
INCOME (LOSS) BEFORE TAXES................... (508) (1,065) (1,622) (1,431) 400
INCOME TAXES................................. -- -- 3 -- 11
------ ------- ------- ------- -------
NET INCOME (LOSS)............................ $ (508) $(1,065) $(1,625) $(1,431) $ 389
====== ======= ======= ======= =======
NET INCOME (LOSS) PER COMMON
SHARE...................................... $(0.33) $ (0.63) $ (0.81) $ (0.85) $ 0.10
====== ======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(Note 13).................................. 1,556 1,691 2,018 1,679 3,706
====== ======= ======= ======= =======
</TABLE>
See accompanying notes to the consolidated financial statements
F-5
<PAGE> 61
DYNAMEX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
REDEEMABLE UNREALIZED
PREFERRED FOREIGN
COMMON STOCK STOCK ADDITIONAL CURRENCY
------------------ ------------------ PAID-IN ACCUMULATED TRANSLATION
SHARES PAR VALUE SHARES PAR VALUE WARRANTS CAPITAL DEFICIT ADJUSTMENT TOTAL
------ --------- ------ --------- -------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 1, 1993.... 17 $-- 2 $ 150 $ -- $ 451 $ (708) $-- $ (107)
Stock dividend........... 296 3 -- -- -- (3) -- -- --
Purchase of redeemable
preferred
stock.................. -- -- (2) (150) -- 75 -- -- (75)
Sale of common stock..... 345 3 -- -- -- 1,114 -- -- 1,117
Sale of redeemable
preferred stock........ -- -- 309 3 -- 3,815 -- -- 3,818
Dividends on convertible
redeemable preferred
stock.................. -- -- -- -- -- -- (299) -- (299)
Escrow shares
surrendered............ (142) (1) -- -- -- 1 -- -- --
Unrealized foreign
currency............... -- -- -- -- -- -- -- -- --
Net translation
adjustment loss........ -- -- -- -- -- -- (1,065) -- (1,065)
----- --- ---- ----- ---- ------ ------- --- -------
BALANCE, JULY 31, 1994..... 516 5 309 3 -- 5,453 (2,072) -- 3,389
Sale of common stock..... 608 6 -- -- -- 2,539 -- -- 2,545
Conversion of redeemable
preferred stock to
common stock........... 1,236 12 (309) (3) -- (9) -- -- --
Dividend on redeemable
preferred
stock.................. -- -- -- -- -- -- (441) -- (441)
Dividend and interest
expense converted to
common stock........... 183 2 -- -- -- 773 -- -- 775
Unrealized foreign
currency translation
adjustment............. -- -- -- -- -- -- -- 7 7
Net loss................. -- -- -- -- -- -- (1,625) -- (1,625)
----- --- ---- ----- ---- ------ ------- --- -------
BALANCE, JULY 31, 1995..... 2,543 25 -- -- -- 8,756 (4,138) 7 4,650
Sale of stock warrants... -- -- -- -- 624 -- -- -- 624
Unrealized foreign
currency translation
adjustment............. -- -- -- -- -- -- -- (5) (5)
Net income............... -- -- -- -- -- -- 389 -- 389
----- --- ---- ----- ---- ------ ------- --- -------
BALANCE, APRIL 30, 1996.... 2,543 $25 -- $ -- $624 $8,756 $(3,749) $ 2 $ 5,658
===== === ==== ===== ==== ====== ======= === =======
</TABLE>
See accompanying notes to the consolidated financial statements
F-6
<PAGE> 62
DYNAMEX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JULY 31 APRIL 30
------------------------- ------------------
1993 1994 1995 1995 1996
----- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $(508) $(1,065) $(1,625) $(1,431) $ 389
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 54 321 678 509 1,066
Loss on disposal of property and equipment.............. 1 1 12 -- --
Loss on disposal Tuscon division........................ -- -- 18 18 --
Unrealized foreign currency adjustment.................. -- -- 7 (8) (5)
Dividend and interest expense converted to common
stock................................................. -- -- 57 -- --
Changes in assets and liabilities:
Cash restricted for acquisition of businesses or payment
of debt from acquisition of businesses................ (77) 77 (18) (18) --
Accounts receivable..................................... (115) (611) (6) 247 (474)
Prepaids and other assets............................... (21) (89) 172 136 (89)
Accounts payable and accrued expenses................... 30 386 (239) 564 951
Dividends payable....................................... -- -- -- 318 --
----- ------- ------- ------- --------
Net cash provided by (used in) operating activities....... (636) (980) (944) 335 1,838
----- ------- ------- ------- --------
INVESTING ACTIVITIES
Payments for acquisitions................................. (366) (2,185) (7,794) -- (12,267)
Purchase of property and equipment........................ (27) (66) (213) (194) (457)
Proceeds from sale of property and equipment.............. 6 -- 12 -- --
----- ------- ------- ------- --------
Net cash used in investing activities..................... (387) (2,251) (7,995) (194) (12,724)
----- ------- ------- ------- --------
FINANCING ACTIVITIES
Principal payment on long term debt....................... (12) (1,361) (1,110) (577) (3,414)
Net borrowings under line of credit....................... (55) 522 2,797 (7) (2,686)
Proceeds from issuance of long term debt.................. 700 -- 4,709 -- 17,876
Proceeds from issuance of stock warrants.................. -- -- -- -- 624
Purchase of redeemable preferred stock.................... -- (75) -- -- --
Net proceeds from sale of common stock.................... -- 4,934 2,460 -- --
Dividends paid............................................ -- (9) (21) (360) --
Other assets, deferred offering expenses and
intangibles............................................. (9) (47) (255) -- (1,504)
----- ------- ------- ------- --------
Net cash provided by (used in) financing activities....... 624 3,964 8,580 (944) 10,896
----- ------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH............................. (399) 733 (359) (803) 10
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 531 132 865 865 506
----- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 132 $ 865 $ 506 $ 62 $ 516
===== ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Cash paid for interest.................................... $ 2 $ 181 $ 403 $ 240 $ 403
----- ------- ------- ------- --------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Capital lease obligation.................................. $ 13 $ 84 $ -- $ 69 $ 43
----- ------- ------- ------- --------
Note issued for sale of 30,912 shares of common stock..... $ -- $ 100 $ -- $ -- $ --
----- ------- ------- ------- --------
In conjunction with the acquisitions described in Note 3,
liabilities were assumed as follows:
Fair value of assets acquired......................... $ 885 $ 5,629 $10,188 $ -- $ 14,325
Cash paid............................................. (366) (2,184) (2,920) -- (12,267)
----- ------- ------- ------- --------
Liabilities assumed and incurred and issuance of notes
payable................................................. $ 519 $ 3,445 $ 7,268 $ -- $ 2,058
===== ======= ======= ======= ========
</TABLE>
See accompanying notes to the consolidated financial statements
F-7
<PAGE> 63
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Dynamex Inc. (formerly Parcelway Systems Holding Corp.) and Subsidiaries
(the "Company") provides same-day delivery and logistics services in the U.S.
and Canada. The Company's primary services are (i) same-day, on-demand delivery
(ii) scheduled distribution and (iii) fleet management. The Company intends to
continue to expand its business through acquiring or developing businesses in
additional areas of the U.S. and Canada and in areas of its existing operations.
Principles of consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries: Parcelway
Courier Systems, Inc., Parcelway Systems (International), Inc., Parcelway
Courier Systems of Illinois, Inc., Parcelway Courier Systems III, Inc., Dynamex
Operations East, Inc., Dynamex Operations West, Inc., and Parcelway Courier
Systems Canada Ltd. All significant intercompany balances and transactions are
eliminated on consolidation.
The accounts of Parcelway Courier Systems Canada Ltd. ("Canada") have been
translated into United States dollars under the provision of Statement of
Financial Accounting Standards No. 52 with the Canadian dollar as the functional
currency. Translation adjustments arising from the translation of Canada's
financial statements into U.S. dollars are reported as a separate component of
equity.
Property and equipment is stated at cost and is depreciated using the
straight-line method over their estimated useful lives or the term of the lease,
whichever is shorter, as follows:
<TABLE>
<S> <C>
Equipment................................................ 5 years
Furniture................................................ 5 years
Vehicles................................................. 7-10 years
Other.................................................... 4 years
</TABLE>
Intangibles arise from the acquisition of operations and include the excess
purchase price over net assets acquired, covenants not-to-compete and other
intangible costs. The excess purchase price over net assets acquired is being
amortized over periods from 5 to 25 years. The Company reviews the value
assigned to the excess purchase price over net assets acquired to determine if
it has been impaired by adverse conditions affecting the Company. Management is
of the opinion that there has been no diminution in the value assigned.
Covenants not-to-compete, trademarks and other intangibles are being amortized
over their estimated effective lives, generally five years. Total amortization
expense was $23,000, $252,000, $450,000, $455,000 (unaudited) and $642,000 for
the years ended July 31, 1993, 1994 and 1995 and for the nine months ended April
30, 1995 and 1996, respectively.
Other assets consist primarily of financing fees incurred. These costs are
being amortized on a straight-line basis over the term of the related financing,
approximately five years.
Revenue recognition -- Revenue is recognized when services are rendered to
customers.
Cash and cash equivalents -- The Company considers all highly liquid
investments with a maturity of three months or less to be cash equivalents. Cash
equivalents are carried at cost, which approximates market value.
Net income (loss) per common share -- Common share equivalents are
considered in the computation of weighted average number of shares and earnings
per share for a profitable period, by dividing net income by the average number
of common shares and common share equivalents represent dilutive effects of the
assumed exercise of outstanding stock options and warrants using the treasury
stock method. Fully diluted earnings per share has not been presented because
the difference between that and primary earnings per share is not material.
New accounting standard -- In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 establishes a
fair value based method of accounting for stock-based employee compensation
plans; however, it also allows companies to continue to measure cost for such
plans using the method of
F-8
<PAGE> 64
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25). Companies that elect to continue with
the accounting under APB 25 must provide certain pro forma disclosures of net
income, as if SFAS 123 had been applied. The accounting and disclosure
requirements of SFAS 123 are effective for the Company for transactions entered
into in fiscal 1997. The Company is currently evaluating its alternatives under
SFAS 123, and its impact on operating results, when initially adopted by the
Company, is not presently known.
Stock split -- On June 3, 1996, the Company declared a 4 for 1 stock split
(Note 13). The effect of such stock split has been retroactively reflected in
the accompanying financial statements.
Reclassifications -- Certain reclassifications of prior year amounts have
been made to conform to the current period financial statement reporting format.
2. ACQUISITIONS
On January 15, 1993, the Company acquired certain assets of Big Apple
Courier Service ("Big Apple"), an on-demand courier service operating in Tucson,
Arizona, for $50,000 and the assumption of $30,000 of liabilities. Effective
April 15, 1993, the Company purchased certain assets and assumed certain
obligations of RAD Delivery Messenger Service ("RAD"), an on-demand courier
service operating in Phoenix, Arizona, for $16,250 and the assumption of $38,750
in liabilities. On July 1, 1993, the Company acquired certain assets of DLC
Consulting Group ("DLC"), an on-demand courier service operating in Phoenix,
Arizona, for $300,000 and a $450,000 note.
During 1994, the Company acquired certain assets of four on-demand courier
companies, located in Phoenix, Chicago, Los Angeles and in Canada for
$2,184,422, notes of $2,588,780, a $300,000 draw on the line of credit and the
assumption of $555,990 in liabilities.
On May 31, 1995, the Company acquired certain assets of Dynamex Express
Inc., the ground courier operations of Air Canada, for cash of $2,920,400 (plus
expenses of $164,336), a $4,709,145 note and the assumption of $2,558,047 in
liabilities.
On December 29, 1995, the Company acquired certain assets of Mayne Nickless
Courier Systems, Inc., Mayne Nickless Messenger Services, Inc. and Mayne
Nickless Canada Inc. (collectively "Mayne Nickless"), a same-day intracity on
demand ground courier service operating in various cities in the U.S. and
Canada, for cash of $11,868,000 (plus expenses of $399,000) and the assumption
of $2,058,418 in liabilities.
Each of these acquisitions has been accounted for using the purchase method
of accounting and the results of operations of these companies have been
included in these financial statements from the date of acquisition. The
following unaudited pro forma combined results of operations for the year ended
July 31, 1995 and for the nine months ended April 30, 1996 are presented as if
the acquisitions occurred as of August 1, 1994.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
JULY 31, ENDED APRIL
1995 30, 1996
---------- -----------
PRO FORMA PRO FORMA
---------- -----------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C>
Sales........................................................ $ 77,787 $61,956
Net income................................................... 54 358
======= =======
Per share:
Net income................................................. $ 0.03 $ 0.10
======= =======
</TABLE>
F-9
<PAGE> 65
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has recorded the assets acquired as shown below (in thousands):
<TABLE>
<CAPTION>
JULY 31
------------------ APRIL 30
1994 1995 1996
------ ------- -----------
<S> <C> <C> <C>
Accounts receivable.................................. $1,553 $ 4,883 $ 3,086
Property and equipment............................... 652 737 440
Other assets......................................... 103 976 --
Intangibles.......................................... 3,321 3,756 10,799
------ ------- -------
Assets acquired...................................... $5,629 $10,352 $14,325
====== ======= =======
</TABLE>
Consideration for these transactions consisted of the following (in
thousands):
<TABLE>
<CAPTION>
JULY 31
------------------ APRIL 30
1994 1995 1996
------ ------- -----------
<S> <C> <C> <C>
Cash................................................. $2,184 $ 3,085 $12,267
Long-term debt....................................... 2,889 4,709 --
Liabilities assumed.................................. 556 2,558 2,058
------ ------- -------
$5,629 $10,352 $14,325
====== ======= =======
</TABLE>
3. INTANGIBLES
Intangibles from the Company's various acquisitions consist of the
following (in thousands):
<TABLE>
<CAPTION>
JULY 31
------------------ APRIL 30
1994 1995 1996
------ ------- -----------
<S> <C> <C> <C>
Excess of purchase price over net assets acquired.... $2,775 $ 6,530 $17,285
Covenants not to compete............................. 1,206 1,206 1,173
Other................................................ 183 183 602
------ ------ -------
4,164 7,919 19,060
Less accumulated amortization........................ (275) (725) (1,193)
------ ------ -------
Intangibles -- net................................... $3,889 $ 7,194 $17,867
====== ====== =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31
------------------ APRIL 30
1994 1995 1996
------ ------- -----------
<S> <C> <C> <C>
Equipment............................................ $ 604 $ 506 $ 1,819
Furniture............................................ 231 540 177
Vehicles............................................. 59 254 244
Other................................................ 2 517 474
---- ------ ------
896 1,817 2,714
Less accumulated depreciation........................ (79) (298) (724)
---- ------ ------
Property and equipment -- net........................ $ 817 $ 1,519 $ 1,990
==== ====== ======
</TABLE>
F-10
<PAGE> 66
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
JULY 31
----------------- APRIL 30
1994 1995 1996
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Bank credit agreement(a)................................ $ -- $ -- $ 14,321
Junior subordinated debentures(b)....................... -- -- 3,904
Note payable(c)......................................... -- 4,709 2,369
Seller financing notes and other(d)..................... 2,765 1,660 273
Capital lease obligations (Note 6)...................... 65 79 43
------ ------ -------
2,830 6,448 20,910
Less current portion.................................... 831 524 2,044
------ ------ -------
$1,999 $5,924 $ 18,866
====== ====== =======
</TABLE>
(a) Bank Credit Agreement
In connection with the acquisition of Mayne Nickless (see Note 2) the
Company entered into a credit agreement with a bank. Proceeds of the facility
were used to fund the acquisition of Mayne Nickless, refinance certain existing
debt, and for working capital. The facility consists of a revolving note of up
to $2,500,000, a $6,000,000 term facility with the Company's Canadian
subsidiary, and a $8,000,000 term facility with the Company and its U.S.
subsidiaries. The amount available under the revolving note is subject to a
borrowing base formula. At April 30, 1996 $2,500,000 was available under the
revolving note of which $800,000 was outstanding. Any amounts outstanding under
the revolving facility are due May 30, 1997 with interest payable quarterly at
prime, or certain other rate options, plus a premium based on certain financial
ratios of the Company. At April 30, 1996 such rate was prime plus 1% or 9.25%.
The U.S. and Canadian term facilities are repayable in quarterly
installments of $400,000 and $75,000, respectively, with any outstanding
balances due at December 31, 2000 and March 31, 2001, respectively. Interest is
payable quarterly based on prime, or certain other rate options, plus a premium
based on certain financial ratios of the Company. At April 30, 1996 such rate
was prime plus 1.25% or 9.50%. By June 28, 1996, or sooner under certain
circumstances, the Company is required to enter into interest rate hedging
arrangements so as to effectively fix the rate of interest on a portion of the
outstanding loans. In addition, the Company is required to prepay the term
facilities with any "Excess Cash Flow", as defined, as well as with certain
proceeds of asset sales, insurance recoveries and the sale of capital stock.
Amounts outstanding under the credit agreement are secured by essentially
all of the assets of the Company and its subsidiaries and by the common stock of
the Company owned by a major shareholder. The agreement also contains
restrictions on the payment of dividends, incurring additional debt, capital
expenditures and investments by the Company as well as requiring the Company to
maintain certain financial ratios.
(b) Junior Subordinated Debentures
In connection with the acquisition of Mayne Nickless the Company issued
$4,500,000 face value of Junior Subordinated Debentures "Debentures" to certain
stockholders of the Company. The Debentures are subordinated to all other debt
for borrowed money and have been recorded at their estimated fair value as of
the date of issue of $3,876,000. Interest is payable semi-annually and accrues
at 12% through December 28, 1996 and at 18% thereafter. The Company may elect to
pay interest in additional Debentures through December 31, 1998. The principal
amount of the Debentures is due June 28, 2001. The Debentures are redeemable at
any time at 100% of face value plus accrued and unpaid interest and must be
redeemed with the proceeds of an initial public offering of the Company's common
stock, subject to their subordination provisions. The purchasers of the
Debentures were also issued warrants to purchase an aggregate of 1,080,000
F-11
<PAGE> 67
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares of the Company's common stock at a price of $0.025 per share; however,
the number of shares which may be purchased will be reduced to 540,000 if the
Debentures are redeemed by June 30, 1996 or by December 31, 1996 if the Company
is actively pursuing a public offering of its common stock on June 30, 1996.
(c) Note Payable
In connection with the acquisition of Dynamex Express, the Company issued
to the seller a note payable in the principal amount of Cdn $6,450,000
($4,709,000). Upon the acquisition of Mayne Nickless this note was partially
repaid and replaced with a new note in the principal amount of Cdn $3,225,000
($2,369,000). The new note is subordinated to the Company's bank credit
agreement above. The note bears interest at 10% which is payable quarterly. The
principal amount of the note is due March 28, 2002. The note contains covenants
identical to those of the bank credit agreement, subject to amendment under
certain conditions.
(d) Seller Financing Notes and Other
In connection with various acquisitions (see Note 2) the Company issued
various notes to the sellers of those businesses. These notes bore interest at
varying rates based primarily on prime. In connection with the acquisition of
Mayne Nickless these notes were repaid.
Principal payments due in each of the next five years for long-term debt
are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................ $2,044
1998................................................ 2,831
1999................................................ 1,940
2000................................................ 1,901
2001................................................ 5,921
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment under capital leases. The leases
expire at various dates through fiscal year 2000. Capital leases included in
property and equipment total $45,000 (net of accumulated amortization of
$50,000) as of April 30, 1996.
Future minimum lease payments for such leases are as follows (in
thousands):
<TABLE>
<CAPTION>
CAPITAL LEASES
--------------
<S> <C>
1997............................................ $ 24
1998............................................ 11
1999............................................ 7
2000............................................ 1
----
43
Less amount representing interest............... 3
----
Net present value of future minimum
lease payments................................ $ 40
=====
</TABLE>
Rent expense for the years ended July 31, 1993, 1994 and 1995 and the nine
months ended April 30, 1995 and 1996 was $31,000, $168,000, $458,000 and
$342,000 (unaudited), and $842,000 respectively.
F-12
<PAGE> 68
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
As of August 1, 1992, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), Accounting for Income Taxes, which requires
an asset and liability approach for financial accounting and reporting for
income taxes. SFAS No. 109 allows the income tax consequences resulting from
utilization of net operating loss carryforwards to be recorded. For purposes of
reporting the Company's deferred tax items under the provisions of SFAS No. 109,
the deferred tax asset of approximately $865,000 as of July 31, 1995
(1994 -- $485,000), arising principally from the available net operating loss
carryforward, has not been reported as an asset due to a valuation allowance.
The Company has U.S. federal net operating loss carryforwards of
approximately $2,152,000 as of July 31, 1995. These net operating loss
carryforwards expire as follows: $132,000 (2007), $636,000 (2008), $665,000
(2009) and $719,000 (2010). The Company also has state net operating loss
carryforwards in certain states. The utilization of the Company's net operating
loss carryforwards is subject to annual limitations under Internal Revenue Code
sec. 382, due to a previous change in ownership of the Company and a change in
its year-end in prior years.
The Company also has Canadian non-capital losses carried forward as of July
31, 1995 of approximately $690,000 expiring in 2002, the benefit of which has
not been reflected in these financial statements.
8. FOREIGN OPERATIONS
Amounts included in the consolidated financial statements applicable to
Canada were as follows (in thousands):
<TABLE>
<CAPTION>
JULY 31 APRIL
---------------------------- 30
1993 1994 1995 1996
----- ------ ------- -------
<S> <C> <C> <C> <C>
Revenues...................................... $ -- $2,436 $15,094 $38,087
Operating income (loss)....................... -- 24 (78) 1,831
Identifiable assets........................... -- 3,528 13,324 16,044
</TABLE>
9. RELATED PARTY TRANSACTIONS
As of April 30, 1996, the Company had a note receivable totalling $28,317
from a stockholder related to the purchase of 5,000 shares of the Company's
common stock.
During the year ended July 31, 1995, the Company paid approximately
$146,000 to a related party for consulting services in connection with
acquisition of Dynamex Express Inc. and other advisory services.
During the period ended April 30, 1996 the Company paid a related party
$70,000 for investment banking services rendered in connection with the
Company's acquisition of Mayne Nickless and $165,000 for the arrangement of bank
financing related to that acquisition.
10. SHARE CAPITAL
During 1994, the Company amended its articles of incorporation to authorize
an additional 990,000 shares of the Company's common stock and to authorize
309,024 shares of a new class of 12% redeemable convertible preferred stock,
$0.01 par value. The Company then effected a common stock split in the form of a
dividend where it distributed 17.2542 shares of common stock for each share of
common stock outstanding. The effect of this dividend was to increase the number
of shares of common stock outstanding from 17,168 to 313,388.
On November 16, 1993, the Company executed a Securities Purchase Agreement
with an unrelated party. Under the terms of the Securities Purchase Agreement,
the Company sold to the unrelated party
F-13
<PAGE> 69
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
309,024 shares of the Company's common stock for $1,000,000 and 1,236,096 shares
of the Company's 12% redeemable convertible preferred stock for $4,000,000. In
connection with this agreement, the Company sold 5,000 shares of the Company's
common stock for $16,175 to another third party and sold 30,912 shares of common
stock to the previous sole stockholder for $100,000 for which a promissory note
was issued. The Company used a portion of these proceeds to retire the
outstanding debt and the accrued interest associated therewith, as well as the
Class A redeemable preferred shares and all related unpaid dividends. In
connection with the sale of the redeemable preferred stock, a stockholder agreed
to place 141,708 shares in escrow, which shares would be surrendered to the
Company without consideration over a 42 month period if certain transactions do
not occur. These shares of the Company's common stock held in escrow by a
stockholder were surrendered to the Company without consideration in July 1994.
In May 1995, in order to provide financing related to the Dynamex Express
Inc. acquisition (Note 2), the Company sold 294,116 shares each of the Company's
common stock to two parties: a) the holders of 309,024 shares of the Company's
common stock and 309,024 shares of the Company's redeemable convertible
preferred stock, and b) an unrelated party. Both parties made a cash payment of
$1,250,000 each. In connection with this financing the holders of 309,024 shares
of the Company's 12% redeemable convertible preferred stock converted these
shares to 1,236,096 shares of the Company's common stock in a dollar for dollar
conversion. The company also sold 20,000 shares of the Company's common stock
for $85,000 to the stockholder.
On December 20, 1995, the Company restated its articles of incorporation to
change its name from Parcelway Systems Holding Corp. to Dynamex Inc. The
articles of incorporation were also restated to increase the authorized capital
stock to 10,000,000 shares of $0.01 par value common stock and to 3,000,000
shares of $0.01 par value preferred stock.
11. STOCK OPTION PLAN
Effective November 16, 1993, the Company's stockholders approved the 1993
Stock Option Plan (the "Plan"). The Plan provides for the granting of incentive
and non-qualified stock options to employees of the Company. Eligibility is
determined by the Board of Directors who administers the Plan. The Company
reserved 131,076 shares of its common stock to be granted under the Plan.
Options granted under the Plan expire up to 10 years after the date of
grant, and become exercisable in accordance with the vesting period as
determined by the Board of Directors on the date of the grant. The exercise
price of such shares, as determined by the Board of Directors on the date of
grant, may be equal to or in excess of the fair market value of the Company's
common stock on the date of grant.
During the year ended July 31, 1994, the Plan provided for options to be
issued for the right to purchase 87,384 shares of the Company's common stock to
an employee exercisable at $3.24 per share.
During the year ended July 31, 1995, an additional 118,520 shares of the
Company's common stock were reserved to be granted under the Plan and options
for the purchase of 139,000 shares of the Company's common stock at $4.25 per
share.
12. SELLING, GENERAL AND ADMINISTRATIVE
Included in selling, general and administrative expenses are bad debt
expenses as follows (in thousands):
<TABLE>
<S> <C>
For the year ended July 31, 1993.............................................. $ 1
For the year ended July 31, 1994.............................................. 61
For the year ended July 31, 1995.............................................. 155
For the nine months ended April 30, 1995 (unaudited).......................... 122
For the nine months ended April 30, 1996...................................... 300
</TABLE>
F-14
<PAGE> 70
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUBSEQUENT EVENT
On June 3, 1996, the Company restated its articles of incorporation to
increase the authorized capital stock to 50,000,000 shares of $0.01 par value
common stock and to 10,000,000 shares of $0.01 par value preferred stock. The
Company then effected a common stock split in the form of a dividend where it
distributed three shares of common stock for every share of common stock
outstanding. The effect of the dividend was to increase the number of shares of
common stock outstanding from 635,865 to 2,543,460.
The Company has entered into agreements, and with respect to Action
Delivery a letter of intent, pursuant to which it will purchase, on or before a
contemplated initial public offering, the same-day delivery businesses of (i)
Action Delivery and Messenger Service Limited (Halifax, Nova Scotia), (ii)
Seidel Enterprises, Inc. and a related company (Columbus, Ohio), (iii) Seko
Enterprises, Inc. and related companies (Chicago, Illinois), (iv) Southbank
Courier, Inc. (New York, New York), and (v) K.H.B. & Associates Ltd. (Winnipeg,
Manitoba). As consideration for the stock of the Acquired Companies, the
stockholders of the Acquired Companies will receive an aggregate of
approximately $7.2 million cash and approximately 126,170 shares of Common Stock
(assuming an initial public offering price of $11.00 per share) and the Company
will repay an aggregate amount of approximately $840,000 of the Acquired
Companies' indebtedness.
F-15
<PAGE> 71
INDEPENDENT AUDITORS' REPORT
To the Shareholder of
Dynamex Express Inc.
We have audited the statements of operations and of changes in financial
position of Dynamex Express Inc. for the five months ended May 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these financial statements present fairly, in all material
respects, the results of operations and the changes in financial position of the
Company for the five months ended May 31, 1995 in accordance with accounting
principles generally accepted in Canada.
DELOITTE & TOUCHE
Toronto, Ontario
September 15, 1995
F-16
<PAGE> 72
DYNAMEX EXPRESS INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED
MAY 31, 1995
------------
<S> <C>
SALES........................................................................... $19,956
COST OF SALES................................................................... 14,300
-------
GROSS PROFIT.................................................................... 5,656
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................................... 4,659
DEPRECIATION AND AMORTIZATION................................................... 212
-------
OPERATING INCOME................................................................ 785
INTEREST INCOME................................................................. 44
OTHER INCOME.................................................................... 105
-------
INCOME BEFORE INCOME TAXES...................................................... 934
INCOME TAXES.................................................................... 9
-------
NET INCOME FOR THE PERIOD....................................................... $ 925
=======
</TABLE>
See accompanying notes to the financial statements
F-17
<PAGE> 73
DYNAMEX EXPRESS INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED
MAY 31, 1995
------------
<S> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES
OPERATING
Net income for the period..................................................... $ 925
Items not affecting cash
Depreciation............................................................... 136
Amortization of goodwill................................................... 76
Loss on disposal of property and equipment................................. 1
Changes in non-cash working capital components............................. (477)
------
661
------
INVESTING
Purchase of property and equipment............................................ (238)
Mortgage principal repayments................................................. 2
------
(236)
------
FINANCING
Repayment of long-term debt................................................... (858)
------
NET CASH OUTFLOW DURING THE PERIOD.............................................. (433)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................. 1,321
------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................ $ 888
======
</TABLE>
See accompanying notes to the financial statements
F-18
<PAGE> 74
DYNAMEX EXPRESS INC.
NOTES TO THE FINANCIAL STATEMENTS
MAY 31, 1995
(IN THOUSANDS OF CANADIAN DOLLARS)
1. INCORPORATION
Dynamex Express Inc., a wholly-owned subsidiary of Air Canada, was
incorporated under the laws of Canada. The Company's principal business activity
is the supply of local same day courier and messenger service throughout various
centres in Canada.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting
principles generally accepted in Canada and include the following significant
accounting policies:
Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided at rates to write off the cost of fixed assets on a
straight-line basis over their estimated useful lives as follows:
<TABLE>
<S> <C>
New vehicle trailers............. 10 years
Old vehicle trailers............. 7 years
Furniture and office equipment... 5 years
Other equipment.................. 5 years
Leasehold improvements........... Term of lease plus 1 renewal
Software......................... 4 years
</TABLE>
Goodwill
Goodwill consists of the excess purchase price paid on acquisition of
certain assets of a company over the value assigned to the identified assets and
the excess of amounts paid over the assigned value of tangible assets upon
acquisition of shares in a company.
These assets are being amortized on a straight-line basis over a period of
29 years and 32 years, respectively. It is management's belief that these
unamortized costs will be recoverable from future profitable operations of the
Company.
Foreign currency translation
Monetary assets and liabilities in foreign currencies are translated at
year-end exchange rates. Gains or losses are included in income for the period,
except gains or losses relating to long-term assets and liabilities which are
deferred and amortized over the remaining life of the items. Other assets and
liabilities and items affecting income are converted at rates of exchange in
effect at the date of the transaction.
3. LEASE COMMITMENTS
The Company has lease commitments, mainly for premises, under operating
leases. During the period, rental expense under these leases included in the
statement of operations amounted to $373. As a result of the acquisition of
certain of the Company's assets by Parcelway Courier Systems Canada Ltd. at May
31, 1995, there are no future lease commitments.
F-19
<PAGE> 75
DYNAMEX EXPRESS INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
4. RELATED PARTY TRANSACTIONS
In addition to amounts disclosed elsewhere in these financial statements,
the Company incurred approximately $130 of interest and expenses for contracted
advice from its parent and affiliates. Sales to the parent amounted to
approximately $594.
5. INCOME TAXES
At December 31, 1994, the Company's preceding taxation year end, there were
approximately $719 of loss carryforwards available to reduce future years'
income, the potential benefit of which has not been recorded in the financial
statements. These loss carryforwards expire in 1998. In addition, there are
approximately $152 of deferred tax debits which have not been recognized as of
December 31, 1994.
6. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The financial statements have been prepared in accordance with generally
accepted accounting principles (GAAP) in Canada and, except as noted below,
conform in all material respects with those of the United States. The
significant difference between Canadian GAAP and United States GAAP is as
follows:
Income Taxes
- - Under Canadian GAAP, tax losses carried forward are only recognized in the
year incurred, if it is virtually certain that the benefit will be realized.
- - Under United States GAAP (Statement of Financial Accounting Standards No. 109
(SFAS 109) which became effective for the year ended December 31, 1993), tax
losses should be recognized as a deferred tax asset, unless based on the
weight of available evidence, it is more likely than not that some portion, or
all of the deferred tax asset will not be realized. A deferred tax asset
should be recognized effective January 1, 1993 on the adoption of SFAS 109.
Reconciliation of Canadian GAAP net income to United States GAAP net income.
<TABLE>
<S> <C>
Net income as reported under Canadian GAAP.................................... $925
Increase in income tax expense................................................ 407
----
Net income as reported under United States GAAP............................... $518
====
</TABLE>
F-20
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
To the Shareholder of
Dynamex Express Inc.
We have audited the statements of operations and changes in financial
position of Dynamex Express Inc. for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the results of operations and the changes in financial position of
Dynamex Express Inc. for each of the three years in the period ended December
31, 1994 in accordance with accounting principles generally accepted in Canada.
PRICE WATERHOUSE
Mississauga, Ontario
February 24, 1995
F-21
<PAGE> 77
DYNAMEX EXPRESS INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
SALES......................................................... $47,068 $43,850 $45,570
COST OF SALES................................................. 34,984 31,665 32,855
------- ------- -------
GROSS PROFIT.................................................. 12,084 12,185 12,715
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................. 12,369 10,741 10,924
DEPRECIATION AND AMORTIZATION................................. 488 501 507
------- ------- -------
OPERATING INCOME (LOSS)....................................... (773) 943 1,284
INTEREST (INCOME) EXPENSE..................................... 141 110 (14)
OTHER INCOME.................................................. (195) (26) (144)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES............................. (719) 859 1,442
PROVISION FOR (RECOVERY OF) INCOME TAXES...................... (203) 19 (27)
------- ------- -------
NET INCOME (LOSS) FOR THE YEAR................................ $ (516) $ 840 $ 1,469
======= ======= =======
</TABLE>
See accompanying notes to the financial statements
F-22
<PAGE> 78
DYNAMEX EXPRESS INC.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1992 1993 1994
----- ------ ------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net income (loss) for the year.................................. $(516) $ 840 $1,469
Items not affecting cash
Depreciation................................................. 306 319 325
Amortization of goodwill..................................... 182 182 182
(Gain) loss on disposal of property and equipment............ 46 10 (28)
Write-down of assets held for sale........................... 14 -- --
Changes in non-cash working capital components.................. (11) (154) 280
----- ------ ------
21 1,197 2,228
----- ------ ------
INVESTING ACTIVITIES
Purchase of property and equipment.............................. (187) (503) (397)
Proceeds from disposal of property and equipment................ 97 150 71
Mortgage principal repayments................................... -- -- 10
----- ------ ------
(90) (353) (316)
----- ------ ------
FINANCING ACTIVITY
Repayment of long-term debt..................................... -- (599) (842)
----- ------ ------
NET CASH INCREASE (DECREASE) DURING THE YEAR...................... (69) 245 1,070
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...................... 75 6 251
----- ------ ------
CASH AND CASH EQUIVALENTS, END OF YEAR............................ $ 6 $ 251 $1,321
===== ====== ======
</TABLE>
See accompanying notes to the financial statements
F-23
<PAGE> 79
DYNAMEX EXPRESS INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS OF CANADIAN DOLLARS)
1. INCORPORATION
Dynamex Express Inc., a wholly-owned subsidiary of Air Canada, was
incorporated under the laws of Canada. The Company's principal business activity
is the supply of local same day courier and messenger service throughout various
centres in Canada.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting
principles generally accepted in Canada and include the following significant
accounting policies:
Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided at rates to write-off the cost of fixed assets on a
straight-line basis over their estimated useful lives as follows:
<TABLE>
<S> <C>
New vehicle trailers........ 10 years
Old vehicle trailers........ 5 years
Furniture and office
equipment................. 5 years
Other equipment............. 5 years
Leasehold improvements...... Term of lease plus 1 renewal
Software.................... 4 years
</TABLE>
Goodwill
Goodwill consists of the excess purchase price paid on acquisition of
certain assets of a company over the value assigned to the identified assets and
the excess of amounts paid over the assigned value of tangible assets upon
acquisition of shares in a company.
These assets are being amortized on a straight-line basis over a period of
29 years and 32 years, respectively. It is management's belief that these
unamortized costs will be recoverable from future profitable operations of the
Company.
Foreign currency translation
Monetary assets and liabilities in foreign currencies are translated at
year-end exchange rates. Gains or losses are included in income for the year,
except gains or losses relating to long-term assets and liabilities which are
deferred and amortized over the remaining life of the items. Other assets and
liabilities and items affecting income are converted at rates of exchange in
effect at the date of the transaction.
F-24
<PAGE> 80
DYNAMEX EXPRESS INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
3. LEASE COMMITMENTS
The Company has lease commitments, mainly for premises, under operating
leases. Rental expense under these leases included in the statements of
operations amounted to $1,007, $1,041 and $1,131 for the years ending December
31, 1992, 1993 and 1994, respectively. Minimum annual rentals under operating
leases are as follows as at December 31, 1994:
<TABLE>
<S> <C>
1995.................................................. $611
1996.................................................. 337
1997.................................................. 173
1998.................................................. 150
1999.................................................. 156
2000 and thereafter................................... 771
</TABLE>
4. RELATED PARTY TRANSACTIONS
Transactions with the parent and affiliates include the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
----------------------------
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
Interest on long-term debt............................... $ 190 $ 147 $ 77
Expenses for contracted services......................... 559 379 330
Sales.................................................... 3,642 3,593 4,333
</TABLE>
5. INCOME TAXES
The Company has applied previously unrecorded tax loss carryforwards
amounting to $1,681 in 1994 and $860 in 1993 to reduce income for tax purposes.
At December 31, 1994, the Company has $719 of loss carryforwards available to
reduce future years' income, the potential benefit of which has not been
recorded in the financial statements. These loss carryforwards expire in 1998.
In addition, there are approximately $152 of deferred tax debits which have not
been recognized as at December 31, 1994.
6. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Under Canadian GAAP, the tax benefit of all or a portion of tax losses is
recognized in the period in which the tax loss occurs, if the corporation is
virtually certain of realizing the tax benefit. Where a tax benefit resulting
from a loss carry-forward was not recorded in the period in which the loss
occurred, it is recognized in the period of realization. Under United States
GAAP (Statement of Financial Accounting Standards No. 109 (SFAS 109)), the
benefit of tax losses is recognized as a deferred tax asset and reduced by a
valuation allowance if, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred tax asset will not be
realized. SFAS 109 became effective for the year ended December 31, 1993 and a
deferred tax asset has been recognized for United States GAAP purposes as at
January 1, 1993 for tax losses carried-forward by the Company. A valuation
allowance was not provided as it was considered more likely than not that the
deferred tax asset would be realized. The effect of this accounting change has
been reflected as a cumulative accounting change in 1993.
F-25
<PAGE> 81
DYNAMEX EXPRESS INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
Reconciliation of Canadian GAAP net income to United States GAAP net income.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
----------------
1993 1994
------ ------
<S> <C> <C>
Net income (loss) as reported under Canadian GAAP................... $ 840 $1,469
Increase in income tax expense...................................... (458) (642)
Cumulative effect of accounting change -- increase in income........ 1,561 --
------ ------
Net income (loss) as reported under United States GAAP.............. $1,943 $ 827
====== ======
</TABLE>
F-26
<PAGE> 82
DYNAMEX EXPRESS INC.
PRO FORMA STATEMENT OF OPERATIONS
TEN MONTHS ENDED MAY 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS OF CANADIAN DOLLARS)
------------------------------------------------------- (IN THOUSANDS)
LESS --------------
FIVE MONTHS ADD SEVEN MONTHS TEN MONTHS TEN MONTHS
ENDED YEAR ENDED ENDED ENDED ENDED
MAY 31, DECEMBER 31, JULY 31, MAY 31, EXCHANGE MAY 31,
1995 1994 1994 1995 RATE 1995
----------- ------------ ------------ ---------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
SALES.................... $19,956 $45,570 $26,029 $39,497 0.73 $28,833
COST OF SALES............ 14,300 32,855 18,506 28,649 0.73 20,914
------- ------- ------- ------- -------
GROSS PROFIT............. 5,656 12,715 7,523 10,848 7,919
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 4,659 10,924 6,526 9,057 0.73 6,612
DEPRECIATION AND
AMORTIZATION........... 212 507 295 424 0.73 310
------- ------- ------- ------- -------
OPERATING INCOME......... 785 1,284 702 1,367 997
INTEREST INCOME -- net... (44) (14) -- (58) 0.73 (42)
OTHER INCOME............. 105 144 9 240 0.73 175
------- ------- ------- ------- -------
INCOME BEFORE TAXES...... 934 1,442 711 1,665 1,214
INCOME TAXES............. 9 (27) (32) 14 0.73 10
------- ------- ------- ------- -------
NET INCOME FOR THE
PERIOD................. $ 925 $ 1,469 $ 743 $ 1,651 $ 1,204
======= ======= ======= ======= =======
</TABLE>
F-27
<PAGE> 83
INDEPENDENT AUDITORS' REPORT
Mayne Nickless Courier:
We have audited the accompanying combined statements of operations and cash
flows of Mayne Nickless Courier (a wholly owned business of Mayne Nickless
Transport, North America until December 28, 1995) for the six months ended
December 28, 1995 and each of the three fiscal years in the period ended July 2,
1995. These financial statements are the responsibility of Mayne Nickless
Courier's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the results of operations and cash flows of Mayne Nickless
Courier for the six months ended December 28, 1995 and each of the three fiscal
years in the period ended July 2, 1995, in conformity with generally accepted
accounting principles.
The accompanying combined financial statements have been prepared from the
separate records maintained by Mayne Nickless Courier and may not be indicative
of the conditions that would have existed or the results of operations if Mayne
Nickless Courier had been operated as an unaffiliated company. As discussed in
Note 2, Statement of Financial Accounting Standards No. 109 requires that the
consolidated amount of current and deferred tax expenses for a group that files
a consolidated tax return be allocated among members of the group when those
members issue separate financial statements. On the basis that Mayne Nickless
Courier is a business and not a separate subsidiary, current and deferred income
taxes have not been provided for in the accompanying combined financial
statements.
DELOITTE & TOUCHE LLP
San Francisco, California
April 19, 1996
F-28
<PAGE> 84
MAYNE NICKLESS COURIER
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------- --------------------------
JULY 4 JULY 3 JULY 2 DECEMBER 28
1993 1994 1995 DECEMBER 31 1995
------- ------- ------- 1994 -----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES................................... $28,858 $28,149 $27,922 $13,904 $14,008
COST OF SALES........................... 17,152 16,808 16,433 8,179 7,985
------- ------- ------- ------- -------
GROSS PROFIT............................ 11,706 11,341 11,489 5,725 6,023
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE............................... 9,546 9,272 8,946 4,873 4,924
DEPRECIATION AND
AMORTIZATION.......................... 1,410 875 666 331 312
------- ------- ------- ------- -------
OPERATING INCOME........................ 750 1,194 1,877 521 787
INTEREST EXPENSE -- Parent.............. 390 111 74 30 36
------- ------- ------- ------- -------
NET INCOME.............................. $ 360 $ 1,083 $ 1,803 $ 491 $ 751
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to the combined financial statements
F-29
<PAGE> 85
MAYNE NICKLESS COURIER
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------- --------------------------
JULY 4 JULY 3 JULY 2 DECEMBER 28
1993 1994 1995 DECEMBER 31 1995
------- ------- ------- 1994 -----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................ $ 360 $ 1,083 $ 1,803 $ 491 $ 751
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization...... 1,410 875 666 331 312
(Gain) loss on disposal of fixed
assets........................... 6 -- (127) -- --
Changes in assets and liabilities
Accounts receivable................ 156 (491) 35 (22) (279)
Prepaid expenses................... (60) 120 63 40 3
Accounts payable and accrued
liabilities...................... 365 664 (56) 412 346
Other.............................. (60) 351 149 (47) (6)
------- ------- ------- ------- -------
Net cash provided by operating
activities............................ 2,177 2,602 2,533 1,205 1,127
------- ------- ------- ------- -------
INVESTING ACTIVITIES
Proceeds from sale of property and
equipment.......................... 151 -- 90 -- --
Purchase of property and equipment.... (461) (334) (263) (130) (77)
------- ------- ------- ------- -------
Net cash used in investing activities... (310) (334) (173) (130) (77)
------- ------- ------- ------- -------
FINANCING ACTIVITIES
Distributions to Parent............... (1,946) (3,065) (1,783) (835) (1,144)
------- ------- ------- ------- -------
INCREASE (DECREASE) IN CASH
EQUIVALENTS........................... (79) (797) 577 240 (94)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................ 887 808 11 11 588
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................ $ 808 $ 11 $ 588 $ 251 $ 494
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to the combined financial statements
F-30
<PAGE> 86
MAYNE NICKLESS COURIER
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
Mayne Nickless Courier provides on-demand delivery, transportation, fleet
management and distribution services. Mayne Nickless Courier is a deliverer of
intracity small parcel same-day shipments for medium to large customers
principally in Southern California, the San Francisco Bay Area, Seattle,
Pittsburgh, Washington D.C., Boston and Vancouver and Victoria, British
Columbia.
Effective December 29, 1995, pursuant to an Asset Purchase Agreement,
Dynamex, Inc. acquired certain assets and assumed certain liabilities of the
same-day courier business of Mayne Nickless Courier Systems Inc., Mayne Nickless
Messenger Service, Inc. and the Canadian same day courier business of Mayne
Nickless North America Inc. (collectively, "Mayne Nickless Courier") from Mayne
Nickless Transport, North America ("Parent") for approximately $12,200 in cash,
including transaction costs and assumption of approximately $2,100 in
liabilities.
The accompanying combined financial statements present operations and cash
flows of Mayne Nickless Courier on an historical basis. The accompanying
combined financial statements have been prepared from the separate records
maintained by Mayne Nickless Courier and may not be indicative of the conditions
that would have existed or the results of operations if Mayne Nickless Courier
had been operated as an unaffiliated company. All significant intercompany
balances and transactions have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year ends on the Sunday nearest June 30. The last
three fiscal years consist of the 52-week periods ended July 2, 1995, July 3,
1994, and July 4, 1993. The audited combined financial statements for the six
months ended December 28, 1995 (the date of acquisition by Dynamex) are included
herein. The combined statements of operations and cash flows for the six months
ended December 31, 1994 are unaudited, but in the opinion of the Company's
management, contain all adjustments (consisting only of normal recurring items)
necessary for a fair presentation of results of operations and cash flows.
Use of Estimates
The preparation of Mayne Nickless Courier's combined financial statements
in conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the balance sheet dates and the reported amounts of revenues and expenses for
the periods presented. Actual results may differ from such estimates.
Cash and Cash Equivalents
For purposes of the combined statements of cash flows, Mayne Nickless
Courier considers all highly liquid investments with a maturity of three months
or less to be cash equivalents.
Depreciation
Depreciation is calculated using the straight-line method over the
estimated useful life of the asset, typically ranging from three to five years
for furniture, fixtures and equipment. The cost of leasehold improvements is
amortized over the useful life of the asset or the applicable lease term
whichever is shorter.
F-31
<PAGE> 87
MAYNE NICKLESS COURIER
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Intangibles
Intangibles arise from the acquisition of operations and include the excess
of the purchase price over net assets acquired, and covenants not-to-compete.
Such excess is being amortized over fifteen years. Covenants not-to-compete are
being amortized over the life of those agreements, generally, two or five years.
Amortization expense for the six months ended December 28, 1995, for the six
months ended December 31, 1994 and the fiscal years ended July 2, 1995, July 3,
1994 and July 4, 1993 was $202, $225 (unaudited), $447, $627, and $1,020,
respectively.
Insurance
Mayne Nickless Courier participates in the Parent's consolidated insurance
program. The Parent is primarily self-insured for workers' compensation,
automobile and general liability costs. The estimated self-insurance liability
is determined based on claims filed and an estimate of claims incurred but not
yet reported. The Parent charges Mayne Nickless Courier for those expenses which
it believes is a reasonable estimate of what Mayne Nickless Courier would incur
if they did not participate in the Parent's consolidated insurance program.
Insurance expense for the six months ended December 28, 1995, for the six months
ended December 31, 1994 and the fiscal years ended July 2, 1995, July 3, 1994
and July 4, 1993 was $476, $463 (unaudited), $925, $1,227, and $1,241,
respectively.
Revenue Recognition
Revenue is recognized when the services are rendered to customers.
Income Taxes
The Company has been included in the Parent's consolidated Canadian, United
States Federal and state income tax returns. The Parent, on a consolidated
basis, has been in a net loss position for income tax purposes for the six
months ended December 31, 1994, and for the fiscal years ended July 2, 1995,
July 3, 1994 and July 4, 1993. Statement of Financial Accounting Standards No.
109 requires that the consolidated amount of current and deferred tax expenses
for a group that files a consolidated tax return be allocated among members of
the group when those members issue separate financial statements. On the basis
that Mayne Nickless Courier is a business and not a separate subsidiary, current
and deferred income taxes have not been provided in the accompanying combined
financial statements.
Translation of Foreign Currencies
Assets and liabilities of the Company's Canadian operations are translated
into U.S. dollars at year-end rates of exchange, and income and expenses are
translated at average rates during the year. Adjustments resulting from
translating financial statements into U.S. dollars were not material in any of
the periods presented.
F-32
<PAGE> 88
MAYNE NICKLESS COURIER
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
3. NET CAPITAL INVESTED BY PARENT
The following is a reconciliation of the net capital invested by the
Parent:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
----------------------------- --------------------------
JULY 4 JULY 3 JULY 2 DECEMBER 31 DECEMBER 28
1993 1994 1995 1994 1995
------- ------- ------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net invested capital, beginning of
period................................ $ 7,200 $ 5,614 $ 3,632 $ 3,632 $ 3,652
Net income for the period............... 360 1,083 1,803 491 751
Distributions to the Parent............. (1,946) (3,065) (1,783) (835) (1,144)
------- ------- ------- ------- -------
Net invested capital, end of year....... $ 5,614 $ 3,632 $ 3,652 $ 3,288 $ 3,259
======= ======= ======= ======= =======
</TABLE>
4. RELATED-PARTY TRANSACTIONS
The Company uses certain resources and administrative staff of the Parent,
including certain finance, legal and office services which are charged to Mayne
Nickless Courier. In connection with these services, the amounts Parent charged
Mayne Nickless Courier for the six months ended December 28, 1995, for the six
months ended December 31, 1994 and the fiscal years ended July 2, 1995, July 3,
1994 and July 4, 1993 was $183, $171 (unaudited), $342, $598, and $841,
respectively. Such amounts are included in selling, general and administrative
expense.
In addition, Mayne Nickless Courier is charged interest by the Parent based
upon the amount of advances made by the Parent. Such amounts are included in the
accompanying combined statements of operations as Interest expense -- Parent.
5. LEASES
The Company leases certain equipment and office space under operating lease
agreements which expire at various dates through June 1998.
At December 28, 1995, future minimum lease payments for such leases are as
follows:
<TABLE>
<S> <C>
1996................................................ $156
1997................................................ 160
1998................................................ 25
----
$341
====
</TABLE>
Rent expense for the for the six months ended December 31, 1995, for the
six months ended December 31, 1994 and the fiscal years ended July 2, 1995, July
3, 1994 and July 4, 1993 was $163, $199 (unaudited), $466, $401, and $393,
respectively.
In the fiscal year ended July 2, 1995, the Company recorded a gain of $127
relating to the sale of the rights to certain radio frequencies, which was
included as a reduction in selling, general and administrative expense.
6. CONTINGENT LIABILITIES
Mayne Nickless Courier is subject to various lawsuits and claims arising
out of its businesses. The Asset Purchase Agreement specifies that the Parent
will retain responsibility for any such liabilities arising from events prior to
December 29, 1995. In the opinion of management of Mayne Nickless Courier, the
ultimate resolution of these matters will not have a material adverse effect on
Mayne Nickless Courier's combined financial statements taken as a whole.
F-33
<PAGE> 89
ACQUIRED COMPANIES
INTRODUCTION TO PRO FORMA COMBINED FINANCIAL STATEMENTS
The accompanying unaudited pro forma combined financial statements present
the combined financial position of the Acquired Companies as of March 31, 1996
and the combined results of operations of the Acquired Companies for the nine
months ended March 31, 1996 and for the twelve months ended June 30, 1995. The
combined financial statements have been adjusted, on a pro forma basis, to
remove the effect of certain assets and liabilities which will not be included
in the assets and liabilities of the Acquired Companies upon their acquisition
by the Company. In addition, the combined results of operations have been
adjusted on a pro forma basis to reflect the effect of changes to certain
components of costs and expenses. These items include adjustments to
compensation to owners and managers of the Acquired Companies to reflect agreed
upon compensation levels subsequent to the acquisition by the Company,
adjustments to rental expense to reflect agreed upon modifications to lease
agreements to be effective subsequent to the acquisition by the Company and
adjustments to certain other costs and expenses which are not ongoing costs of
the businesses acquired and would not have been incurred had the Acquisitions by
the Company occurred at the beginning of the period presented.
F-34
<PAGE> 90
ACQUIRED COMPANIES
PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS OF CANADIAN
DOLLARS)
------------------------------- (IN THOUSANDS)
ACTION --------------------------------------------
DELIVERY SEKO
AND ENTERPRISES
K.H.B. & MESSENGER EX- AND
ASSOCIATES SERVICE COM- CHANGE COM- SEIDEL RELATED SOUTHBANK
LTD. LIMITED BINED RATE BINED DELIVERY COMPANIES COURIER, INC.
---------- --------- ------ ------ ------ -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS CURRENT
Cash and cash equivalents...... $ -- $ -- $ -- 0.74 $ -- $ 64 $ -- $ 61
Accounts receivable -- net..... 1,398 536 1,934 0.74 1,431 175 922 338
Other current assets........... 164 37 201 0.74 148 40 341 25
1,562 573 2,135 1,579 279 1,263 424
PROPERTY AND EQUIPMENT -- net.... 543 731 1,274 0.74 943 46 1,790 23
INTANGIBLES -- net............... -- -- -- 0.74 -- -- 307 --
OTHER ASSETS -- net.............. 363 -- 363 0.74 269 -- 18 --
------ ------- ------- ------ ---- ------- -----
$2,468 $ 1,304 $ 3,772 $2,791 $325 $ 3,378 $ 447
====== ======= ======= ====== ==== ====== =====
LIABILITIES CURRENT LIABILITIES.. $1,494 $ 515 $ 2,009 0.74 $1,487 $ 71 $ 1,234 $ 26
LONG-TERM DEBT AND OTHER......... 191 500 691 0.74 511 -- 1,170 --
1,685 1,015 2,700 1,998 71 2,404 26
SHAREHOLDERS' EQUITY............. 783 289 1,072 0.74 793 254 974 421
------ ------- ------ ------ ---- ------- -----
$2,468 $ 1,304 $3,772 $2,791 $325 $ 3,378 $ 447
====== ======= ====== ====== ==== ======= =====
<CAPTION>
(IN THOUSANDS)
------------------------
ADJUST- COM-
MENTS NOTES BINED
------- ----- ------
<S> <C> <C> <C>
ASSETS CURRENT
Cash and cash equivalents...... $ (38) 3(b) $ 87
Accounts receivable -- net..... (237) 3(a) 2,629
Other current assets........... (137) 3(a) 417
(412) 3,133
PROPERTY AND EQUIPMENT -- net.... (1,339) 3(a) 1,463
INTANGIBLES -- net............... -- 307
OTHER ASSETS -- net.............. (152) 3(a) 135
------- ------
$(1,903) $5,038
======= ======
LIABILITIES CURRENT LIABILITIES.. $ (872) 3(a) $1,946
LONG-TERM DEBT AND OTHER......... (1,486) 3(a) 195
(2,358) 2,141
SHAREHOLDERS' EQUITY............. 455 3(a) 2,897
------- ------
$(1,903) $5,038
======= ======
</TABLE>
See accompanying notes to the pro forma combined financial statements
F-35
<PAGE> 91
ACQUIRED COMPANIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE ADD LESS
MONTHS THREE MONTHS SIX MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, MARCH 31, JUNE 30, MARCH 31,
1995 1996 1995 ADJUSTMENTS NOTE 1996
------------ ------------ ---------- ----------- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
SALES............................ $20,836 $5,260 $10,809 $ -- $15,287
COST OF SALES.................... 13,199 3,363 7,008 -- 9,554
------- ------ ------- ----- -------
GROSS PROFIT..................... 7,637 1,897 3,801 -- 5,733
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES....................... 7,042 1,602 3,389 (752) 4(b) 4,503
DEPRECIATION AND AMORTIZATION.... 368 87 185 (46) 4(a) 224
------- ------ ------- ----- -------
OPERATING INCOME................. 227 208 227 798 1,006
INTEREST EXPENSE................. 262 76 131 (131) 4(a) 76
OTHER INCOME..................... 160 47 84 -- 123
------- ------ ------- ----- -------
INCOME BEFORE TAXES.............. 125 179 180 929 1,053
INCOME TAXES..................... 45 29 29 -- 45
------- ------ ------- ----- -------
NET INCOME....................... $ 80 $ 150 $ 151 $ 929 $ 1,008
======= ====== ======= ===== =======
</TABLE>
See accompanying notes to the pro forma combined financial statements
F-36
<PAGE> 92
ACQUIRED COMPANIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------------------------
(IN THOUSANDS OF CANADIAN
DOLLARS) (IN THOUSANDS)
-------------------------------- ----------------------------------------
ACTION
DELIVERY SEKO
AND ENTERPRISES
K.H.B. & MESSENGER EX- AND SOUTHBANK
ASSOCIATES SERVICE COM- CHANGE COM- SEIDEL RELATED COURIER,
LTD. LIMITED BINED RATE BINED DELIVERY COMPANIES INC.
---------- --------- ------- ------ ------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SALES........................................ $8,502 $3,100 $11,602 0.73 $8,469 $1,929 $9,053 $1,597
COST OF SALES................................ 6,394 2,728 9,122 0.73 6,659 1,184 4,838 739
------ ------ ------- ------ ------ ------ ------
GROSS PROFIT................................. 2,108 372 2,480 1,810 745 4,215 858
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................... 1,761 244 2,005 0.73 1,464 701 3,825 759
DEPRECIATION AND AMORTIZATION................ 121 55 176 0.73 128 20 196 8
------ ------ ------- ------ ------ ------ ------
OPERATING INCOME............................. 226 73 299 218 24 194 91
INTEREST EXPENSE............................. 55 109 164 0.73 120 -- 129 13
OTHER INCOME................................. 37 20 57 0.73 42 3 113 --
------ ------ ------- ------ ------ ------ ------
INCOME BEFORE TAXES.......................... 208 (16) 192 140 27 178 78
INCOME TAXES................................. 67 (3) 64 0.73 47 2 3 14
------ ------ ------- ------ ------ ------ ------
NET INCOME................................... $ 141 $ (13) $ 128 $ 93 $ 25 $ 175 $ 64
====== ====== ======= ====== ====== ====== ======
<CAPTION>
ADD
SIX LESS
MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
COM- JUNE 30, JUNE 30, ADJUST- JUNE 30,
BINED 1995 1994 MENTS NOTE 1995
------- -------- ---------- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
SALES........................................ $21,048 $10,809 $10,138 $ -- $21,719
COST OF SALES................................ 13,420 7,008 6,609 -- 13,819
------- ------- ------- ------- -------
GROSS PROFIT................................. 7,628 3,801 3,529 -- 7,900
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................... 6,749 3,389 3,161 (1,071) 4(b) 5,906
DEPRECIATION AND AMORTIZATION................ 352 185 199 (61) 4(a) 277
------- ------- ------- ------- -------
OPERATING INCOME............................. 527 227 169 1,132 1,717
INTEREST EXPENSE............................. 262 131 114 (159) 4(a) 120
OTHER INCOME................................. 158 84 80 -- 162
------- ------- ------- ------- -------
INCOME BEFORE TAXES.......................... 423 180 135 1,291 1,759
INCOME TAXES................................. 66 29 17 -- 78
------- ------- ------- ------- -------
NET INCOME................................... $ 357 $ 151 $ 118 $ 1,291 $ 1,681
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to the pro forma combined financial statements
F-37
<PAGE> 93
ACQUIRED COMPANIES
SCHEDULE TO PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS OF CANADIAN DOLLARS)
----------------------------------- (IN THOUSANDS)
ACTION -------------------
DELIVERY
K.H.B. & AND
ASSOCIATES MESSENGER EXCHANGE SEIDEL
LTD. SERVICE COMBINED RATE COMBINED DELIVERY
---------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SALES................................................... $8,615 $3,118 $11,733 0.73 $8,565 $1,776
COST OF SALES........................................... 6,504 2,681 9,185 0.73 6,705 1,116
------ ------ ------- ------ ------
GROSS PROFIT............................................ 2,111 437 2,548 1,860 660
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................................... 1,819 272 2,091 0.73 1,526 628
DEPRECIATION AND AMORTIZATION........................... 146 63 209 0.73 153 19
------ ------ ------- ------ ------
OPERATING INCOME........................................ 146 102 248 181 13
INTEREST EXPENSE........................................ 80 102 182 0.73 133 --
OTHER INCOME............................................ 37 9 46 0.73 34 21
------ ------ ------- ------ ------
INCOME BEFORE TAXES..................................... 103 9 112 82 34
INCOME TAXES............................................ 20 2 22 0.73 16 7
------ ------ ------- ------ ------
NET INCOME.............................................. $ 83 $ 7 $ 90 $ 66 $ 27
====== ====== ======= ====== ======
<CAPTION>
SEKO
ENTERPRISES
AND RELATED SOUTHBANK
COMPANIES COURIER, INC. COMBINED
------------ ------------- --------
<S> <C<C> <C> <C>
SALES................................................... $8,489 $2,006 $20,836
COST OF SALES........................................... 4,421 957 13,199
------ ------ -------
GROSS PROFIT............................................ 4,068 1,049 7,637
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................................... 3,886 1,002 7,042
DEPRECIATION AND AMORTIZATION........................... 174 22 368
------ ------ -------
OPERATING INCOME........................................ 8 25 227
INTEREST EXPENSE........................................ 129 -- 262
OTHER INCOME............................................ 105 -- 160
------ ------ -------
INCOME BEFORE TAXES..................................... (16) 25 125
INCOME TAXES............................................ 11 11 45
------ ------ -------
NET INCOME.............................................. $ (27) $ 14 $ 80
====== ====== =======
</TABLE>
See accompanying notes to the pro forma combined financial statements
F-38
<PAGE> 94
ACQUIRED COMPANIES
SCHEDULE TO PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS OF CANADIAN DOLLARS) (IN THOUSANDS)
------------------------------------ ------------------------------------------------------------
ACTION SEKO
K.H.B. & DELIVERY AND ENTERPRISES
ASSOCIATES MESSENGER EXCHANGE SEIDEL AND RELATED SOUTHBANK
LTD. SERVICE COMBINED RATE COMBINED DELIVERY COMPANIES COURIER, INC. COMBINED
---------- ------------ -------- -------- -------- -------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES............. $2,202 $818 $3,020 0.73 $2,205 $417 $2,062 $576 $5,260
COST OF SALES..... 1,661 709 2,370 0.73 1,730 263 1,111 259 3,363
------ ---- ------ ------ ---- ------ ---- ------
GROSS PROFIT...... 541 109 650 475 154 951 317 1,897
SELLING, GENERAL
AND
ADMINISTRATIVE
EXPENSES........ 391 35 426 0.73 311 137 941 213 1,602
DEPRECIATION AND
AMORTIZATION.... 40 19 59 0.73 43 5 38 1 87
------ ---- ------ ------ ---- ------ ---- ------
OPERATING INCOME
(LOSS).......... 110 55 165 121 12 (28) 103 208
INTEREST
EXPENSE......... 20 32 52 0.73 38 -- 38 -- 76
OTHER INCOME...... 8 2 10 0.73 7 7 33 -- 47
------ ---- ------ ------ ---- ------ ---- ------
INCOME (LOSS)
BEFORE TAXES.... 98 25 123 90 19 (33) 103 179
INCOME TAXES...... 29 -- 29 0.73 21 2 -- 6 29
------ ---- ------ ------ ---- ------ ---- ------
NET INCOME........ $ 69 $ 25 $ 94 $ 69 $ 17 $ (33) $ 97 $ 150
====== ==== ====== ====== ==== ====== ==== ======
</TABLE>
See accompanying notes to the pro forma combined financial statements
F-39
<PAGE> 95
ACQUIRED COMPANIES
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying pro forma combined financial statement present the
combined financial position of the Acquired Companies as of March 31, 1996 and
the combined results of operations of the Acquired companies for the nine months
ended March 31, 1996 and for the twelve months ended June 30, 1995. The combined
financial statements have been adjusted, on a pro forma basis, to remove the
effect of certain assets and liabilities which will not be included in the
assets and liabilities of the Acquired Companies upon their acquisition by the
Company. In addition, the combined results of operations have been adjusted on a
pro forma basis to reflect the effect of changes to certain components of costs
and expenses. These items include adjustments to compensation to owners and
managers of the Acquired Companies to reflect agreed upon compensation levels
subsequent to the acquisition by the Company, adjustments to rental expense to
reflect agreed upon modifications to lease agreements to be effective subsequent
to the acquisition by the Company and adjustments to certain other costs and
expenses which are not ongoing costs of the businesses acquired and would not
have been incurred had the Acquisition by the Company occurred at the beginning
of the period presented.
2. CURRENCY CONVERSION
The financial statements of those Acquired Companies, for whom the Canadian
dollar is the functional currency, have been translated into U.S. dollars at the
conversion rate then in effect in the case of the balance sheets and at the
average conversion rate for the period in the case of the statements of
operations.
3. PRO FORMA ADJUSTMENTS TO COMBINED BALANCE SHEET
(a) Eliminates certain assets and related debt which will not be assets and
liabilities of the Acquired Companies upon the acquisition by the
Company.
(b) Adjusts working capital to reflect pro forma adjustment to aggregate
purchase price arising from working capital and funded debt provisions
of purchase agreements.
4. PRO FORMA ADJUSTMENT TO COMBINED STATEMENT OF OPERATIONS
(a) Eliminates interest expense and depreciation related to assets and
liabilities eliminated from combined balance sheet.
(b) Adjusts costs and expenses for items which are not ongoing costs of the
business and which would not have been incurred had the Acquired
Companies been owned by the Company as of the beginning of the period
presented:
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, 1996 JUNE 30, 1995
----------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Compensation expense...................... $ 670 $ 931
Facilities rent........................... (27) (41)
Other..................................... 109 181
------ -------
$ 752 $ 1,071
============== ===============
</TABLE>
The above costs represent the difference between historical compensation
expense paid to the owners of the Acquired Companies and the compensation to be
paid under contractual arrangements which become effective upon the Closing,
adjustments to facilities rent pursuant to revised lease agreements which become
effective upon the Closing and the elimination of other benefits and perquisites
historically received by the owners of the Acquired Companies and which by
contractual arrangement will not be available subsequent to the Closing.
F-40
<PAGE> 96
INDEPENDENT AUDITORS' REPORT
To the Shareholder of
K.H.B. & Associates Ltd.
We have audited the consolidated balance sheets of K. H. B. & Associates
Ltd. as at December 31, 1994 and 1995 and the consolidated statements of
operations and retained earnings and changes in financial position for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1994 and 1995 and the results of its operations and the changes in its financial
position for the years then ended in accordance with accounting principles
generally accepted in Canada.
DELOITTE & TOUCHE
Winnipeg, Manitoba
March 8, 1996
F-41
<PAGE> 97
K.H.B. & ASSOCIATES LTD.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31
1994 1995 1996
------ ------ -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT
Accounts receivable (Note 2)................................ $1,313 $1,343 $ 1,398
Prepaid and other current assets (Note 3)................... 127 147 156
Current portion of employee housing loan.................... 8 8 8
------ ------ -------
1,448 1,498 1,562
PROPERTY AND EQUIPMENT -- net (Note 4)........................ 550 570 543
OTHER ASSETS -- net (Note 5).................................. 441 361 363
------ ------ -------
$2,439 $2,429 $ 2,468
====== ====== =======
LIABILITIES
CURRENT
Bank indebtedness........................................... $ 727 $ 934 $ 772
Commissions payable......................................... 124 114 278
Accounts payable............................................ 402 284 214
Accrued liabilities......................................... 105 90 136
Income taxes payable........................................ 59 16 31
Current portion of long-term debt (Note 6).................. 63 68 63
------ ------ -------
1,480 1,506 1,494
LONG-TERM DEBT (Note 6)....................................... 59 85 67
------ ------ -------
1,539 1,591 1,561
------ ------ -------
NON-CONTROLLING INTEREST (Note 7)............................. 124 124 124
------ ------ -------
COMMITMENTS AND CONTINGENT LIABILITY (Note 8)
SHAREHOLDER'S EQUITY
Share capital
Authorized
Unlimited number of
1% to 12% non-cumulative, voting Class A preference
shares redeemable at $1 per share
1% to 6% non-cumulative, non-voting Class B
preference shares redeemable at $1.00 per share
Common shares
Issued
815,750 Class B preference shares...................... -- -- --
484,250 Class A preference shares...................... -- -- --
1,000,000 common shares.................................. -- -- --
Retained earnings........................................... 776 714 783
------ ------ -------
776 714 783
------ ------ -------
$2,439 $2,429 $ 2,468
====== ====== =======
</TABLE>
See accompanying notes to the consolidated financial statements
F-42
<PAGE> 98
K.H.B. & ASSOCIATES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
---------------- ----------------
1994 1995 1995 1996
------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE.................................................... $8,502 $8,615 $2,182 $2,202
COST OF SALES.............................................. 6,394 6,504 1,648 1,661
------ ------ ------ ------
GROSS PROFIT............................................... 2,108 2,111 534 541
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................................. 1,761 1,819 366 391
DEPRECIATION AND AMORTIZATION.............................. 121 146 36 40
------ ------ ------ ------
OPERATING INCOME........................................... 226 146 132 110
INTEREST EXPENSE........................................... 55 80 23 20
OTHER INCOME............................................... (37) (37) (12) (8)
------ ------ ------ ------
INCOME BEFORE INCOME TAXES................................. 208 103 121 98
INCOME TAXES............................................... 67 20 41 29
------ ------ ------ ------
NET INCOME................................................. 141 83 80 69
RETAINED EARNINGS, BEGINNING OF PERIOD..................... 635 776 776 714
------ ------ ------ ------
776 859 856 783
DIVIDENDS PAID............................................. -- 145 -- --
------ ------ ------ ------
RETAINED EARNINGS, END OF PERIOD........................... $ 776 $ 714 $ 856 $ 783
====== ====== ====== ======
</TABLE>
See accompanying notes to the consolidated financial statements
F-43
<PAGE> 99
K.H.B. & ASSOCIATES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31 ENDED MARCH 31
-------------- --------------
1994 1995 1995 1996
----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING
ACTIVITIES
OPERATING
Net income for the period.................................. $ 141 $ 83 $ 80 $ 69
Items not affecting cash
Depreciation and amortization........................... 121 146 36 40
Deferred income taxes................................... 2 1 -- --
Loss on disposal of fixed assets........................ 30 3 -- --
----- ----- ----- -----
294 233 116 109
Changes in non-cash working capital balances
Accounts receivable..................................... (337) (30) 140 (54)
Prepaid expenses and supplies........................... 46 (20) 15 (9)
Accounts payable and accrued liabilities................ 238 (143) (229) 140
Income taxes payable.................................... 23 (43) 26 15
Dividends paid.......................................... -- (145) -- --
----- ----- ----- -----
264 (148) 68 201
----- ----- ----- -----
FINANCING
Net (decrease) increase in long-term debt.................. (56) 32 (17) (23)
----- ----- ----- -----
INVESTING
Property and equipment..................................... (103) (164) (36) (10)
Proceeds on disposal of property and equipment............. -- 6 -- --
Other assets............................................... (251) 67 (5) (6)
----- ----- ----- -----
(354) (91) (41) (16)
----- ----- ----- -----
NET CASH INFLOW (OUTFLOW).................................... (146) (207) 10 162
BANK INDEBTEDNESS, BEGINNING OF PERIOD....................... (581) (727) (727) (934)
----- ----- ----- -----
BANK INDEBTEDNESS, END OF PERIOD............................. $(727) $(934) $(717) $(772)
===== ===== ===== =====
</TABLE>
See accompanying notes to the consolidated financial statements
F-44
<PAGE> 100
K.H.B. & ASSOCIATES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
1. ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and conform in all material
respects with those of the United States. The Company's significant accounting
policies are as follows:
Basis of presentation
These consolidated financial statements include the accounts of the Company
and its subsidiary Zipper Transportation Services Ltd./Services de Transport
Zipper Ltee.
Inventory
Supplies and uniforms on hand are recorded at the lower cost and net
realizable value.
Property and equipment
Fixed assets are recorded at cost and depreciation is provided at the
following rates:
<TABLE>
<S> <C>
Vehicles........................................ 30% diminishing-balance basis
Furniture, fixtures and equipment............... 20% diminishing-balance basis
Radio equipment................................. 10% straight-line basis
Computer and telephone equipment................ 20% straight-line basis
Leasehold improvements.......................... Over the term of the lease;
minimum 5 years
</TABLE>
Capital leases
Lease agreements which transfer the risks and rewards of ownership of the
leased assets are accounted for as capital leases, whereby the fair market value
of the leased asset is capitalized and amortized over its useful life to the
company. A corresponding obligation under capital lease is recorded and reduced
by the lease payments, based on the interest rate implicit in the lease.
Goodwill
Goodwill consists of the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over twenty years. Annually,
the Company evaluates the net carrying value of goodwill to determine if there
has been any impairment in value. This determination is made by reviewing
projections of future cash flow to be generated by the acquired business.
Deferred income taxes
Deferred income taxes arise primarily as a result of the excess of
depreciation recorded for book purposes in excess of capital cost allowance
claimed for tax purposes.
F-45
<PAGE> 101
K.H.B. & ASSOCIATES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
2. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Trade................................................... $1,069 $ 986 $ 971
Drivers and sundry...................................... 21 33 20
Staff advances.......................................... 2 3 1
Due from Alcrest Holdings Ltd. ......................... 55 66 66
Due from shareholder.................................... 166 255 340
------ ------ ------
$1,313 $1,343 $1,398
====== ====== ======
</TABLE>
The amounts due from Alcrest Holdings Ltd., a related party, and from
shareholder are non-interest bearing with no fixed terms of repayment.
3. PREPAID EXPENSES AND SUPPLIES
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Supplies................................................ $ 107 $ 107 $ 101
Uniforms................................................ 11 13 13
Other................................................... 9 27 42
------ ------ ------
$ 127 $ 147 $ 156
====== ====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Vehicles................................................ $ 114 $ 96 $ 96
Radio equipment......................................... 277 277 277
Furniture, fixtures and equipment....................... 326 367 364
Computer equipment...................................... 220 249 249
Leasehold improvements.................................. 142 199 212
Radio equipment under capital lease..................... 227 227 227
------ ------ ------
1,306 1,415 1,425
Less: Accumulated depreciation.......................... 756 845 882
------ ------ ------
$ 550 $ 570 $ 543
====== ====== ======
</TABLE>
F-46
<PAGE> 102
K.H.B. & ASSOCIATES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
5. OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Employee housing loan................................... $ 251 $ 192 $ 192
Security deposits....................................... 32 23 28
Deferred income taxes................................... 17 16 16
Goodwill (net of amortization of $82 in 1994; $93 in
1995; $96 in 1996).................................... 149 138 135
------ ------ ------
449 369 371
Less: Current portion of employee housing loan.......... 8 8 8
------ ------ ------
$ 441 $ 361 $ 363
====== ====== ======
</TABLE>
The employee housing loan is non-interest bearing and is secured by a
second mortgage on the employees residence. The loan is repayable in annual
installments of $8.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Bank loan, repayable in monthly principal installments
of $1 plus interest at the bank's prime rate plus
1.25%................................................. $ 35 $ -- $ --
Bank loan, repayable in monthly principal installments
of $3 plus interest at the bank's prime rate plus
1.50%................................................. -- 90 82
Bank loan, repayable in blended, monthly installments of
$1, bearing interest at 9.90%......................... -- 29 26
Obligation under capital lease.......................... 87 34 22
------ ------ ------
122 153 130
Current portion......................................... 63 68 63
------ ------ ------
$ 59 $ 85 $ 67
====== ====== ======
</TABLE>
a) The bank loans and bank indebtedness are secured by the following:
- registered general assignment of book debts and covering all assets;
- assignment of insurance proceeds on all assets;
- keyman life insurance in the amount of $400;
- unlimited guarantee of the shareholder and an associated company;
- assignment of the second mortgage on the home of the shareholder.
(b) Expected principal repayments over the next 5 years are as follows:
<TABLE>
<S> <C>
1996................................................... $63
1997................................................... 40
1998................................................... 41
1999................................................... 4
</TABLE>
F-47
<PAGE> 103
K.H.B. & ASSOCIATES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
(c) Interest expense on long-term debt during the year ended December 31,
1994 and 1995 and during the three months ended March 31, 1995 and 1996
amounted to $18, $14, $4 (unaudited) and $4 (unaudited), respectively.
(d) The obligation under capital lease is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Minimum lease payments in:
1995............................................. $61 $-- $--
1996............................................. 36 36 23
--- --- ---
97 36 23
Less amounts representing interest................. (10) (2) (1)
--- --- ---
$87 $34 $22
=== === ===
</TABLE>
7. NON-CONTROLLING INTEREST
The non-controlling interest is comprised of 119,000 Class C preference
shares issued by the Company's subsidiary. These shares which carry
non-cumulative dividend entitlements of 1% to 12%, may be redeemed for $124 at
the option of the subsidiary or the holder. The holder is related to the
shareholder of the Company.
8. COMMITMENTS AND CONTINGENT LIABILITY
(a) The Company has entered into various lease agreements for premises,
vehicles and equipment with expiry dates to 1998. Minimum annual rents,
net of anticipated recovery of rental charges for leased vehicles and
premises, for each of the next three years is as follows:
<TABLE>
<S> <C>
1996................................................... $62
1997................................................... 21
1998................................................... 12
</TABLE>
(b) The Company has provided guarantees and postponements of claim of the
debts of an affiliated corporation, Alcrest Holdings Ltd. As at March
31, 1996, these debts amounted to $766 (unaudited).
9. RELATED PARTY TRANSACTIONS
The financial statements include rent paid to Alcrest Holdings Ltd., a
company affiliated by common control, in the amount of $204, $204, $51
(unaudited) and $51 (unaudited) for the year ended December 31, 1994 and 1994
and the three months ended March 31, 1995 and 1996, respectively.
F-48
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Action Delivery and Messenger Service Limited
We have audited the consolidated balance sheets of Action Delivery and
Messenger Service Limited as at December 31, 1994 and 1995 and the consolidated
statements of operations and retained earnings and changes in financial position
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1994 and 1995, and the results of its operations and the changes in its
financial position for the years then ended, in accordance with accounting
principles generally accepted in Canada.
DELOITTE & TOUCHE
Halifax, Nova Scotia
March 29, 1996
F-49
<PAGE> 105
ACTION DELIVERY AND MESSENGER SERVICE LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT
Accounts receivable (net of allowance for doubtful accounts of
$12, $15 and nil (unaudited) at December 31, 1994 and 1995
and March 31, 1996, respectively).......................... $ 437 $ 425 $ 427
Due from parent company....................................... 31 94 109
Income taxes recoverable...................................... 3 -- --
Inventories................................................... 18 15 15
Prepaid expenses.............................................. 12 8 12
Current portion of term loans receivable (Note 4)............. 20 14 10
------ ------ -------
521 556 573
PROPERTY AND EQUIPMENT -- net (Note 3).......................... 784 725 731
TERM LOANS RECEIVABLE (Note 4).................................. 15 -- --
------ ------ -------
$1,320 $1,281 $ 1,304
====== ====== =======
LIABILITIES
CURRENT
Bank indebtedness (Note 5).................................... $ 330 $ 313 $ 323
Accounts payable.............................................. 62 73 46
Accrued liabilities........................................... 19 -- 12
Accrued driver wages.......................................... 64 75 88
Income tax payable............................................ -- 2 2
Current portion of long-term debt............................. 43 44 44
------ ------ -------
518 507 515
DEFERRED INCOME TAXES........................................... 3 3 3
LONG-TERM DEBT (Note 6)......................................... 542 507 497
------ ------ -------
1,063 1,017 1,015
------ ------ -------
COMMITMENTS AND CONTINGENT LIABILITY (Notes 8 and 9)
SHAREHOLDERS' EQUITY
Share capital
Authorized
1,000 4% non-cumulative, non-voting, redeemable,
retractible preference shares with a redemption value
of $1 each
4,000 common shares
Issued
500 preferred shares..................................... 1 1 1
100 common shares........................................ -- -- --
------ ------ -------
1 1 1
Retained earnings............................................... 256 263 288
------ ------ -------
257 264 289
------ ------ -------
$1,320 $1,281 $ 1,304
====== ====== =======
</TABLE>
See accompanying notes to the consolidated financial statements
F-50
<PAGE> 106
ACTION DELIVERY AND MESSENGER SERVICE LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
---------------- ------------
1994 1995 1995 1996
------ ------ ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES......................................................... $3,100 $3,118 $777 $818
COST OF SALES................................................. 2,728 2,681 648 709
------ ------ ---- ----
GROSS PROFIT.................................................. 372 437 129 109
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................. 244 272 56 35
------ ------ ---- ----
128 165 73 74
DEPRECIATION.................................................. 55 63 15 19
------ ------ ---- ----
OPERATING INCOME.............................................. 73 102 58 55
OTHER (INCOME) EXPENSES
Interest.................................................... 109 102 32 32
Other....................................................... (20) (9) (3) (2)
------ ------ ---- ----
INCOME (LOSS) BEFORE INCOME TAXES............................. (16) 9 29 25
INCOME TAXES (RECOVERY OF) PROVISION FOR...................... (3) 2 -- --
------ ------ ---- ----
NET INCOME (LOSS)............................................. (13) 7 29 25
RETAINED EARNINGS, BEGINNING OF PERIOD........................ 307 256 256 263
------ ------ ---- ----
294 263 285 288
DIVIDENDS..................................................... 38 -- -- --
------ ------ ---- ----
RETAINED EARNINGS, END OF PERIOD.............................. $ 256 $ 263 $285 $288
====== ====== ==== ====
</TABLE>
See accompanying notes to the consolidated financial statements
F-51
<PAGE> 107
ACTION DELIVERY AND MESSENGER SERVICE LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31 ENDED MARCH 31
-------------- --------------
1994 1995 1995 1996
----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING
ACTIVITIES
OPERATING
Net income (loss).......................................... $ (13) $ 7 $ 29 $ 25
Items not affecting cash
Depreciation............................................ 55 63 15 19
Loss on disposal of property and equipment.............. -- (3) (2) --
----- ----- ----- -----
42 67 42 44
Changes in non-cash operating working capital items........ (19) (35) 2 (22)
----- ----- ----- -----
23 32 44 22
----- ----- ----- -----
FINANCING
Issue of share capital..................................... 1 -- -- --
Reduction in term loans receivable......................... 4 20 4 3
Issue of long-term debt.................................... 93 14 -- --
Repayment of long-term debt................................ (56) (48) (3) (10)
Dividends paid............................................. (38) -- -- --
----- ----- ----- -----
4 (14) 1 (7)
----- ----- ----- -----
INVESTING
Acquisition of property and equipment...................... (132) (9) (7) (25)
Proceeds on disposal of property and equipment............. 13 8 2 --
----- ----- ----- -----
(119) (1) (5) (25)
----- ----- ----- -----
NET CASH INFLOW (OUTFLOW).................................... (92) 17 40 (10)
BANK INDEBTEDNESS, BEGINNING OF PERIOD....................... (238) (330) (330) (313)
----- ----- ----- -----
BANK INDEBTEDNESS, END OF PERIOD............................. $(330) $(313) $(290) $(323)
===== ===== ===== =====
</TABLE>
See accompanying notes to the consolidated financial statements
F-52
<PAGE> 108
ACTION DELIVERY AND MESSENGER SERVICE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
1. DESCRIPTION OF BUSINESS
Action Delivery and Messenger Service Limited is incorporated under the
laws of the Province of Nova Scotia, and is primarily involved in the provision
of same-day delivery service in the metropolitan Halifax area.
2. ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and conform in all material
respects, with those of the United States, and include the following significant
accounting policies:
Consolidation
The financial statements include the accounts of Action Delivery and
Messenger Service Limited and its wholly owned subsidiaries, Atlantic Medical
Transportation Services Limited and Atlantic Bonded Courier Services Limited.
Inventories
Inventory is valued at lower of cost and replacement cost.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using
the declining-balance method at the following annual rates:
<TABLE>
<S> <C>
Building.............................................. 4%
Furniture and equipment............................... 20%
Radios................................................ 20%
Computer equipment.................................... 30%
Vehicles.............................................. 30%
</TABLE>
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Land and land improvements............................ $ 111 $ 111 $ 111
Building.............................................. 618 618 629
Furniture and equipment............................... 83 84 85
Radios................................................ 122 122 122
Computer equipment.................................... 106 114 117
Vehicles.............................................. 94 30 40
------ ------ ------
1,134 1,079 1,104
Less: Accumulated depreciation........................ 350 354 373
------ ------ ------
$ 784 $ 725 $ 731
====== ====== ======
</TABLE>
F-53
<PAGE> 109
ACTION DELIVERY AND MESSENGER SERVICE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
4. TERM LOANS RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31
------------ MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
11.50% term loan receivable, repayable in monthly
installments of $0.5, principal and interest, until
November, 1996............................................. $ 9 $ 4 $ 3
11.50% term loan receivable, repayable in monthly
installments of $0.4, principal and interest, until July,
1997....................................................... 10 5 4
11.50% term loan receivable, repayable in monthly
installments of $0.5, principal and interest, until
October, 1996.............................................. 10 5 4
11.50% term loan receivable, repayable in monthly
installments of $0.5, principal and interest, until
October, 1995.............................................. 6 -- --
--- --- ---
35 14 11
Less: Current portion........................................ 20 14 10
--- --- ---
$15 $-- $ 1
=== === ===
</TABLE>
5. BANK INDEBTEDNESS
The company's bank indebtedness is secured by a pledge of its accounts
receivable and debentures in the amount of $750 providing first fixed and
floating charges on all of the companys assets. Bank indebtedness includes the
following amounts:
<TABLE>
<CAPTION>
DECEMBER 31
------------ MARCH 31,
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Demand loan, bearing interest at prime plus 1.5%........... $300 $235 $242
Demand loan, bearing interest at prime plus 2%............. -- 70 70
Cheques issued in excess of funds on deposit............... 30 8 11
---- ---- ----
$330 $313 $323
==== ==== ====
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
------------ MARCH 31,
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
8.5% mortgage, payable in monthly installments of $5
including principal and interest. The mortgage is secured
by land and building having a carrying value of $596..... $474 $466 $ 463
Term bank loan, bearing interest at prime plus 1.75%,
payable in monthly installments of $2 including principal
and interest, maturing September, 1999, secured by
specific equipment....................................... 69 67 65
Term bank loan, bearing interest at prime plus 2%, payable
in monthly installments of $0.4 including principal and
interest, maturing June, 1997, secured by a specific
vehicle.................................................. 10 6 5
</TABLE>
F-54
<PAGE> 110
ACTION DELIVERY AND MESSENGER SERVICE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Term bank loan, bearing interest at prime plus 2%, payable
in monthly installments of $0.4 including principal and
interest, maturing December, 1996, secured by a specific
vehicle.................................................. 10 5 4
Term bank loan, bearing interest at prime plus 2%, payable
in monthly installments of $0.4 including principal and
interest, maturing August, 1996, secured by a specific
vehicle.................................................. 8 4 2
Term bank loan, bearing interest at prime plus 2%, payable
in monthly installments of $0.4 including principal and
interest, maturing October, 1996, secured by a specific
vehicle.................................................. 7 3 2
Term bank loan, bearing interest at prime plus 2%, payable
in monthly installments of $3 including principal and
interest, matured February, 1995, secured by a specific
vehicle.................................................. 7 -- --
---- ---- ----
585 551 541
Less: Current portion...................................... 43 44 44
---- ---- ----
$542 $507 $497
==== ==== ====
</TABLE>
The principal due within each of the next five years on long-term debt,
assuming financing of the mortgage under similar terms, is approximately as
follows:
<TABLE>
<S> <C>
1996................................................... $44
1997................................................... 33
1998................................................... 33
1999................................................... 24
2000................................................... 15
</TABLE>
7. RELATED PARTY TRANSACTIONS
Management fees paid to an associated company for the years ended December
31, 1994 and 1995 and for the three months ended March 31, 1995 and 1996 were
$18, $36, $8 (unaudited) and $8 (unaudited), respectively.
8. CONTINGENT LIABILITY
The company has outstanding letters of credit to I/F/O Canada Post
totalling $40 which are due February 29, 1997.
9. COMMITMENT
The company is renting office equipment and a truck under long-term leases
expiring in 2000 and 2002, respectively. The annual rent is approximately $15.
F-55
<PAGE> 111
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Southbank Courier, Inc.
We have audited the accompanying consolidated balance sheets of Southbank
Courier, Inc. as at December 31, 1994 and 1995, and the related consolidated
statements of operations and retained earnings and of cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Southbank Courier, Inc. as
of December 31, 1994 and 1995, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE
Toronto, Ontario
May 22, 1996
F-56
<PAGE> 112
SOUTHBANK COURIER, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT
Cash........................................................... $ 45 $ -- $ 61
Account receivable (net of allowance for doubtful accounts of
$45, $45 and $45 (unaudited) at December 31, 1994 and 1995
and March 31, 1996, respectively)........................... 260 298 338
Other current assets (Note 2).................................. 17 21 25
---- ---- ----
322 319 424
PROPERTY AND EQUIPMENT -- net (Note 3)........................... 19 24 23
---- ---- ----
$341 $343 $447
==== ==== ====
LIABILITIES
CURRENT
Bank indebtedness.............................................. $ -- $ 6 $ --
Accounts payable............................................... 18 10 21
Accrued liabilities............................................ 7 3 5
Income taxes payable........................................... 6 -- --
---- ---- ----
31 19 26
---- ---- ----
COMMITMENTS (Note 5)
SHAREHOLDERS' EQUITY
Common stock; 200 shares authorized, 200 shares outstanding
(Note 4).................................................... 374 374 374
Retained earnings (deficit).................................... (64) (50) 47
---- ---- ----
310 324 421
---- ---- ----
$341 $343 $447
==== ==== ====
</TABLE>
See accompanying notes to the consolidated financial statements
F-57
<PAGE> 113
SOUTHBANK COURIER, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
----------------- -------------
1994 1995 1995 1996
------ ------ ---- ----
<S> <C> <C> <C> <C>
(UNAUDITED)
SALES...................................................... $1,597 $2,006 $477 $576
COST OF SALES.............................................. 739 957 245 259
------ ------ ---- ----
GROSS PROFIT............................................... 858 1,049 232 317
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................................. 759 1,002 215 213
DEPRECIATION AND AMORTIZATION.............................. 8 22 1 1
------ ------ ---- ----
OPERATING INCOME........................................... 91 25 16 103
INTEREST EXPENSE........................................... 13 -- -- --
------ ------ ---- ----
INCOME BEFORE INCOME TAXES................................. 78 25 16 103
PROVISION FOR INCOME TAXES................................. 14 11 10 6
------ ------ ---- ----
NET INCOME................................................. 64 14 6 97
(DEFICIT), BEGINNING OF PERIOD............................. (128) (64) (64) (50)
------ ------ ---- ----
RETAINED EARNINGS (DEFICIT), END OF PERIOD................. $ (64) $ (50) $(58) $ 47
====== ====== ==== ====
</TABLE>
See accompanying notes to the consolidated financial statements
F-58
<PAGE> 114
SOUTHBANK COURIER, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
------------- -------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income for the period................................... $ 64 $ 14 $ 6 $ 97
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 8 22 1 1
Interest expense converted to common stock............... 13 -- -- --
Loss (gain) on disposal of fixed assets.................. 11 (1) -- --
---- ---- ---- ----
96 35 7 98
Changes non-cash working capital balances
Account receivable -- net................................ (59) (38) (66) (40)
Other current assets..................................... (3) (4) (1) (4)
Accounts payable and accrued liabilities................. (23) (12) 58 13
Income taxes payable..................................... (2) (6) -- --
---- ---- ---- ----
9 (25) (2) 67
---- ---- ---- ----
FINANCING ACTIVITIES
Long-term debt.............................................. 18 -- -- --
---- ---- ---- ----
INVESTING ACTIVITIES
Acquisition of property and equipment....................... (13) (29) -- --
Proceeds on disposal of property and equipment.............. -- 3 -- --
---- ---- ---- ----
(13) (26) -- --
---- ---- ---- ----
INCREASE (DECREASE) IN CASH POSITION.......................... 14 (51) (2) 67
CASH POSITION, BEGINNING OF PERIOD............................ 31 45 45 (6)
---- ---- ---- ----
CASH POSITION, END OF PERIOD.................................. $ 45 $ (6) $ 43 $ 61
==== ==== ==== ====
CASH POSITION IS COMPRISED OF:
Cash........................................................ $ 45 $ -- $ 43 $ 61
Bank indebtedness........................................... -- (6) -- --
---- ---- ---- ----
$ 45 $ (6) $ 43 $ 61
==== ==== ==== ====
</TABLE>
See accompanying notes to the consolidated financial statements
F-59
<PAGE> 115
SOUTHBANK COURIER, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of Southbank Courier, Inc. include
the accounts of the Company and its wholly-owned subsidiaries Van Man, Inc. and
Flying Pigs, Inc.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
is provided at the following rates:
<TABLE>
<S> <C>
Vehicles......................................... 20% diminishing-balance basis
Computers........................................ 20% diminishing-balance basis
Radio equipment.................................. 14% diminishing-balance basis
Furniture & fixtures............................. 14% - 20% diminishing-balance basis
Leasehold Improvements........................... term of lease, straight-line
</TABLE>
Revenue Recognition
Revenue is recognized when the services are rendered to customers.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Due from employees......................................... $ 4 $10 $ 6
Security deposits.......................................... 8 8 8
Other...................................................... 5 3 11
--- --- ---
$17 $21 $25
=== === ===
</TABLE>
F-60
<PAGE> 116
SOUTHBANK COURIER, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Vehicles................................................... $ 4 $-- $--
Furniture & fixtures....................................... 3 3 3
Radio equipment............................................ 29 33 33
Computer equipment......................................... 5 27 27
Leasehold improvements..................................... 11 11 11
--- --- ---
52 74 74
Less: Accumulated depreciation and amortization............ 33 50 51
--- --- ---
$19 $24 $23
=== === ===
</TABLE>
4. RELATED PARTY TRANSACTIONS
The companies paid management fees totalling $70, $172, $35 (unaudited),
and $4 (unaudited) to a shareholder during the years ended December 31, 1994 and
1995 and the three months ended March 31, 1995 and 1996, respectively.
5. COMMITMENTS
The Company leases office space under operating lease agreements which
expire in September 1997.
At December 31, 1995, future minimum lease payments for such leases are as
follows:
<TABLE>
<S> <C>
1996................................................... $22
1997................................................... 16
---
$38
===
</TABLE>
Rent expense for the years ended December 31, 1994 and 1995 and for the
three months ended March 31, 1995 and 1996 was $58, $64, $16 (unaudited) and $20
(unaudited), respectively.
F-61
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Seko Enterprises, Inc. and Related Companies
We have audited the combined balance sheets of Seko Enterprises, Inc. and
Related Companies as at December 31, 1994 and 1995 and the combined statements
of income and retained earnings and cash flows for the years then ended. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of Seko Enterprises, Inc. and Related
Companies as at December 31, 1994 and 1995 and the results of their operations
and the changes in their cash flows for the years then ended in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE
Toronto, Ontario
April 5, 1996
F-62
<PAGE> 118
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
COMBINED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT
Accounts receivable (net of allowance for doubtful accounts
of $79; $72; $50 (unaudited) at December 31, 1994 and
1995 and March 31, 1996, respectively)................... $1,018 $ 981 $ 922
Prepaid and other assets (Note 4)........................... 354 387 341
------ ------ ---------
1,372 1,368 1,263
PROPERTY AND EQUIPMENT -- net (Note 5)........................ 1,791 1,785 1,790
INTANGIBLES -- net (Note 6)................................... 84 311 307
OTHER ASSETS (Note 7)......................................... 13 17 18
------ ------ ---------
$3,260 $3,481 $ 3,378
====== ====== =========
LIABILITIES
CURRENT
Bank indebtedness........................................... $ 3 $ 34 $ 60
Accounts payable and accrued liabilities (Note 8)........... 392 418 394
Due to stockholders......................................... 579 845 698
Current portion of notes payable (Note 9)................... -- 70 70
Current portion of long-term debt (Note 10)................. 9 12 12
------ ------ ---------
983 1,379 1,234
NOTES PAYABLE (Note 10)....................................... -- 93 88
LONG-TERM DEBT (Notes 11)..................................... 1,093 1,082 1,082
------ ------ ---------
2,076 2,554 2,404
------ ------ ---------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 11)
SHAREHOLDERS' EQUITY
Common stock
Seko -- (No par value; authorized 1,000 shares; issued 200
shares)
Metro -- (No par value; authorized 1,000 shares; issued 100
shares)
Attention -- (No par value; authorized 1,000 shares; issued
100 shares)
National -- (No par value; authorized 1,000 shares; issued
100 shares).............................................. 10 10 10
Additional paid-in capital.................................... 50 70 150
Retained earnings............................................. 1,124 847 814
------ ------ ---------
1,184 927 974
------ ------ ---------
$3,260 $3,481 $ 3,378
====== ====== =========
</TABLE>
See accompanying notes to the combined financial statements
F-63
<PAGE> 119
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
---------------- ----------------
1994 1995 1995 1996
------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES...................................................... $9,053 $8,489 $2,104 $2,062
COST OF SALES.............................................. 4,838 4,421 1,140 1,111
------ ------ ------ ------
GROSS PROFIT............................................... 4,215 4,068 964 951
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................................. 3,825 3,886 897 941
DEPRECIATION AND AMORTIZATION.............................. 196 174 30 38
------ ------ ------ ------
OPERATING INCOME (LOSS).................................... 194 8 37 (28)
------ ------ ------ ------
OTHER (INCOME) EXPENSE
Interest................................................. 129 129 36 38
Other.................................................... (113) (105) (29) (33)
------ ------ ------ ------
16 24 7 5
------ ------ ------ ------
INCOME (LOSS) BEFORE TAXES................................. 178 (16) 30 (33)
INCOME TAXES............................................... 3 11 11 --
------ ------ ------ ------
NET INCOME (LOSS).......................................... 175 (27) 19 (33)
RETAINED EARNINGS, BEGINNING OF PERIOD..................... 949 1,124 1,124 847
DIVIDENDS.................................................. -- 250 -- --
------ ------ ------ ------
RETAINED EARNINGS, END OF PERIOD........................... $1,124 $ 847 $1,143 $ 814
====== ====== ====== ======
</TABLE>
See accompanying notes to the combined financial statements
F-64
<PAGE> 120
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
-------------- --------------
1994 1995 1995 1996
----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................... $ 175 $ (27) $ 19 $ (33)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization........................... 196 174 30 38
Increase in cash value of life insurance................ (2) (4) (1) (1)
Changes in operating assets and liabilities
Accounts receivable, net.............................. (156) 37 41 59
Prepaid and other current assets...................... (12) (33) 36 46
Accounts payable and accrued liabilities.............. (242) 26 7 (24)
Due to stockholders................................... 336 266 (180) (147)
----- ----- ----- -----
Net cash provided by (used in) operating activities........ 295 439 (48) (62)
INVESTING ACTIVITIES
Additions to property and equipment, net................... (86) (158) (7) (39)
Additions to intangibles, net.............................. (35) (237) (57) --
----- ----- ----- -----
Net cash used in investing activities...................... (121) (395) (64) (39)
----- ----- ----- -----
FINANCING ACTIVITIES
Principal payments on long-term debt....................... 3 (8) (2) --
(Redemption) issuance of common stock...................... (1) 20 -- --
Notes payable.............................................. -- 163 77 (5)
Payment of dividends and return of capital................. (49) (250) -- 80
----- ----- ----- -----
Net cash provided by (used in) financing activities........ (47) (75) 75 75
----- ----- ----- -----
NET DECREASE (INCREASE) IN BANK INDEBTEDNESS................. 127 (31) (37) (26)
BANK INDEBTEDNESS, BEGINNING OF PERIOD....................... (130) (3) (3) (34)
----- ----- ----- -----
BANK INDEBTEDNESS, END OF PERIOD............................. $ (3) $ (34) $ (40) $ (60)
===== ===== ===== =====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for
Interest................................................ $ 129 $ 129 $ 36 $ 38
Income taxes............................................ 2 -- -- --
----- ----- ----- -----
$ 131 $ 129 $ 36 $ 38
===== ===== ===== =====
</TABLE>
See accompanying notes to the combined financial statements
F-65
<PAGE> 121
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BUSINESS AND ORGANIZATION
Seko Enterprises, Inc., Metro Messenger, Inc., Attention Messenger, Inc.
and National Messenger System, Inc. (collectively the "Companies") are engaged
in the courier business primarily in the Chicago metropolitan area. The
Companies provide courier services through the use of independent contractors.
2. PRINCIPLES OF COMBINATION
The Companies are under common control of a single shareholder either
directly or through wholly-owned companies and have been combined due to their
interdependence and form of operations. The combined financial statements
include the accounts of Seko Enterprises, Inc., Metro Messenger, Inc., Attention
Messenger, Inc. and National Messenger System, Inc. after all intercompany
balances have been eliminated.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives of the assets as
indicated in the following table by use of the straight-line and the accelerated
methods used for tax purposes.
<TABLE>
<CAPTION>
YEARS METHOD
------ -------------------------------
<S> <C> <C>
Buildings and improvements................. 31.5 MACRS
Leasehold improvements..................... 5 Straight-line
Computers and programs..................... 5 Straight-line, ACRS, and MACRS
Equipment and fixtures..................... 5-7 Straight-line, ACRS, and MACRS
Vehicles................................... 5 ACRS and MACRS
</TABLE>
Intangibles
Customer lists and covenants not to compete are amortized over 15 years
under the straight-line method.
Income Taxes
Certain of the Companies are S Corporations for income tax purposes and,
accordingly, any income tax liabilities are the responsibility of the respective
stockholders. The Companies have elected to have its stockholders taxed directly
on all income pursuant to Section 1377 of the Internal Revenue Code.
Accordingly, these combined financial statements, do not reflect income taxes
for these S Corporations. Federal and state income taxes have been provided for
C Corporations.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
F-66
<PAGE> 122
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
4. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1994 1995
------- ------- MARCH 31
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Prepaid insurance................................... $ 46 $ 65 $ 35
Prepaid expenses.................................... 31 49 17
Employee receivables................................ 12 19 16
Deposits............................................ 5 25 22
Income taxes recoverable............................ -- 41 35
Due from shareholder................................ 85 83 84
Other............................................... 175 105 132
------- ------- -------
$ 354 $ 387 $ 341
======= ======= =======
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1994 1995
------- ------- MARCH 31
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Land................................................ $ 343 $ 343 $ 343
Buildings and improvements.......................... 1,459 1,459 1,459
Leasehold improvements.............................. 17 17 17
Computers and programs.............................. 829 875 875
Equipment and fixtures.............................. 1,036 1,081 1,097
Vehicles............................................ 278 320 343
------- ------- -------
3,962 4,095 4,134
Less accumulated depreciation....................... (2,171) (2,310) (2,344)
------- ------- -------
$ 1,791 $ 1,785 $ 1,790
======= ======= =======
</TABLE>
6. INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1994 1995
------- ------- MARCH 31
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill............................................ $ 41 $ 16 $ 16
Customer lists...................................... 98 240 240
Covenants not to compete............................ 117 130 130
------- ------- -------
256 386 386
Less accumulated amortization....................... (172) (75) (79)
------- ------- -------
$ 84 $ 311 $ 307
======= ======= =======
</TABLE>
F-67
<PAGE> 123
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
7. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash surrender value of life insurance policy............. $13 $17 $18
=== === ===
</TABLE>
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable.......................................... $128 $145 $108
Accrued payroll and related benefits and commissions...... 214 167 130
Income taxes payable...................................... 2 -- --
Other accrued liabilities................................. 48 106 156
---- ---- ----
$392 $418 $394
==== ==== ====
</TABLE>
9. NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable to competitors.............................. $-- $163 $158
Less current portion...................................... -- 70 70
--- ---- ----
$-- $ 93 $ 88
=== ==== ====
</TABLE>
Certain of the Companies have acquired customer lists from competitors. As
part of the consideration for the acquisition of these assets, the Companies are
committed to pay a percentage of the gross sales derived from these customers of
5.83% to 10%, for terms of 36 months.
F-68
<PAGE> 124
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
10. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Mortgage payable to NSK Enterprises, Inc.
No set maturity, interest at 12% monthly payments of
interest only secured by a first charge on
9250 Ivanhoe Street property......................... $ 537 $ 537 $ 537
Mortgage payable,
Maturing June 1, 1995, interest at 10.5%, monthly
payments of principal and interest, secured by a
first charge on
939 W. Lake Street property.......................... 559 -- --
Mortgage payable,
Maturing August 1, 2005, interest at 9%, monthly
payments of principal and interest, secured by a
first charge on
939 W. Lake Street property.......................... -- 555 557
Loan payable,
Maturing May 1, 1996, interest at 3.9%, monthly
payments of principal and interest, secured by
automobile........................................... 6 2 --
------ ------ ------
1,102 1,094 1,094
Less current portion................................... 9 12 12
------ ------ ------
$1,093 $1,082 $1,082
====== ====== ======
</TABLE>
At March 31, 1996, the aggregate amounts of principal maturities of
long-term obligations are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
1996............................................................. $ 12
1997............................................................. 8
1998............................................................. 9
1999............................................................. 10
2000............................................................. 11
Thereafter....................................................... 1,044
-------
Total............................................................ $ 1,094
=======
</TABLE>
11. COMMITMENTS AND CONTINGENT LIABILITIES
Litigation
The Companies are, from time to time, a party to litigation arising in the
normal course of its business, most of which involve claims for personal injury
and property damage incurred in connection with its operations. Management
believes that none of these actions will have a material adverse effect on the
financial position or results of operations of the Companies.
F-69
<PAGE> 125
SEKO ENTERPRISES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
12. PENSION PLAN
The pension plan covers employees of all of the Companies. Through 1994,
the plan provided pension benefits based on years of service and the employee's
compensation during the five highest consecutive years of participation. The
pension plan benefit formula was amended effective April 1, 1989 to reflect new
provisions of the Tax Reform Act of 1986. These amendments resulted in a
decrease in the future benefits provided. The benefits earned as of April 1,
1989 by existing participants were not reduced; however, in many cases, these
benefits exceed projected benefits under the amended formula. During 1995, the
plan was amended to change the method by which participant benefits are
calculated effective March 31, 1994, with benefits earned subsequently using the
amended formula. The projected benefit obligation correspondingly decreased by
approximately $223 and is being amortized over 19 years. The Companies' funding
policy is to contribute annually an amount greater than the minimum or up to the
maximum amount that can be deducted for federal income tax purposes.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future. The
plans assets consist principally of mutual funds.
The following table sets forth the plan's funded status and amounts
recognized in the Companies' balance sheets:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1994 1995
------ ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits of $775
and $26, respectively............................................ $ 793 $ 26
====== ======
Projected benefit obligations for service rendered to date......... $1,027 $ 68
Plan assets at fair value.......................................... 1,127 519
------ ------
Plan assets in excess of projected benefit obligation.............. 100 450
Unrecognized net loss from past experience different that
assumed.......................................................... 231 89
Unrecognized prior service cost.................................... -- (212)
Unrecognized net asset as of April 1, 1989, being recognized over
19 years......................................................... (260) (242)
------ ------
Prepaid pension cost included in prepaid and other current
assets........................................................... $ 71 $ 85
====== ======
</TABLE>
Net pension (benefit) cost for the years ended December 31, 1994 and 1995
include the following components:
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Service cost -- benefits earned during the year.................... $ 53 $ 56
Interest cost on projected benefit obligation...................... 72 1
Plan assets at fair value.......................................... 7 (29)
Plan assets in excess of projected benefit obligation.............. (117) (42)
------ ------
Net periodic pension (benefit)..................................... $ 15 $ (14)
====== ======
</TABLE>
Assumptions used in the above calculations are as follows:
<TABLE>
<CAPTION>
AS OF MARCH 31,
1994 AND 1995
---------------
<S> <C>
Discount rates................................................ 8.0%
Rates of increase in compensation levels...................... 5.0
Expected long-term rate of return on assets................... 8.0
</TABLE>
The 1994 and 1995 figures include benefits for 19 employees of Metro
Messenger, Inc. and 9 employees of National Messenger System, Inc., whose
employees are covered under the same plan (83 in 1994; 82 in 1995 in total).
F-70
<PAGE> 126
INDEPENDENT AUDITORS' REPORT
To the Shareholder of Seidel Delivery
We have audited the accompanying combined balance sheets of Seidel Delivery
as of December 31, 1994 and 1995, and the related combined statements of income
and retained earnings and of cash flows for the years then ended. The combined
financial statements include the accounts of Seidel Enterprises, Inc. and NOW
Courier, Inc. (collectively "the Companies"), which do business as Seidel
Delivery and are under common ownership by an individual shareholder. These
financial statements are the responsibility of the Companies management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined financial position of Seidel Delivery as of
December 31, 1994 and 1995, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Columbus, Ohio
March 22, 1996
F-71
<PAGE> 127
SEIDEL DELIVERY
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
----------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents.......................................... $ 18 $ 40 $ 64
Accounts receivable................................................ 196 181 175
Prepaid expenses and other......................................... 41 53 40
---- ---- -----
255 274 279
PROPERTY AND EQUIPMENT -- net (Note 3)............................... 62 50 46
---- ---- -----
$317 $324 $ 325
==== ==== =====
LIABILITIES
CURRENT
Accounts payable
Trade........................................................... $ 28 $ 31 $ 13
Affiliate....................................................... 30 -- --
Shareholder..................................................... -- 5 5
Accrued expenses
Payroll and related expenses.................................... 30 33 17
Other........................................................... 19 18 36
---- ---- -----
107 87 71
---- ---- -----
SHAREHOLDER'S EQUITY
Common stock:
Seidel -- 3,000 shares authorized, 1,660 shares issued and
outstanding, no par value
NOW -- 500 shares authorized, 50 shares issued and outstanding,
no par value................................................... 12 12 12
Retained earnings.................................................. 198 225 242
---- ---- -----
210 237 254
---- ---- -----
$317 $324 $ 325
==== ==== =====
</TABLE>
See accompanying notes to the combined financial statements
F-72
<PAGE> 128
SEIDEL DELIVERY
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31 MARCH 31
----------------- -------------
1994 1995 1995 1996
------ ------ ---- ----
<S> <C> <C> <C> <C>
(UNAUDITED)
SALES...................................................... $1,929 $1,776 $457 $417
COST OF SALES.............................................. 1,184 1,116 284 263
------ ------ ---- ----
GROSS PROFIT............................................... 745 660 173 154
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............... 701 628 150 137
DEPRECIATION AND AMORTIZATION.............................. 20 19 5 5
------ ------ ---- ----
OPERATING INCOME........................................... 24 13 18 12
OTHER INCOME............................................... 3 21 5 7
------ ------ ---- ----
INCOME BEFORE PROVISION FOR INCOME TAXES................... 27 34 23 19
PROVISION FOR INCOME TAXES................................. 2 7 1 2
------ ------ ---- ----
NET INCOME................................................. 25 27 22 17
RETAINED EARNINGS, BEGINNING OF PERIOD..................... 173 198 198 225
------ ------ ---- ----
RETAINED EARNINGS, END OF PERIOD........................... $ 198 $ 225 $220 $242
====== ====== ==== ====
</TABLE>
See accompanying notes to the combined financial statements
F-73
<PAGE> 129
SEIDEL DELIVERY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31 MARCH 31
------------- -------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income.................................................. $ 25 $ 27 $ 22 $ 17
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 20 19 5 4
Loss on disposal of property and equipment............... 3 -- -- --
Change in operating assets and liabilities:
Accounts receivable.................................... 23 15 12 6
Prepaid expenses and other............................. (7) (12) 12 13
Accounts payable and accrued expenses.................. (44) (20) (32) (16)
---- ---- ---- ----
Net cash provided by operating activities................... 20 29 19 24
INVESTING ACTIVITIES
Capital expenditures for property and equipment............. (9) (7) (5) --
---- ---- ---- ----
NET INCREASE IN CASH AND CASH EQUIVALENTS..................... 11 22 14 24
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................ 7 18 18 40
---- ---- ---- ----
CASH AND CASH EQUIVALENTS, END OF PERIOD...................... $ 18 $ 40 $ 32 $ 64
==== ==== ==== ====
SUPPLEMENTAL INFORMATION
Cash paid during the period for income taxes................ $ 3 $ 7 $ -- $ --
==== ==== ==== ====
</TABLE>
See accompanying notes to the combined financial statements
F-74
<PAGE> 130
SEIDEL DELIVERY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The combined financial statements of Seidel Delivery (collectively the
"Companies") include the accounts of Seidel Enterprises, Inc. ("Seidel") and NOW
Courier, Inc. ("NOW") and is engaged in the courier business primarily in
central Ohio, and provide services through the use of independent contractors.
Revenue Recognition -- Revenues are recorded when deliveries are complete.
Nature of Combination -- The Companies are under the common control of a
single shareholder and have been combined due to their interdependence and form
of operations. Seidel is a management company with the sole purpose of providing
management and administrative support to NOW, the operating company. NOW has no
employees and relies on sub-contractors for all labor needs. For combined
financial reporting purposes, all intercompany balances have been eliminated.
Property and Equipment -- Property and equipment are stated at cost.
Depreciation and amortization are provided using the straight-line method over
the estimated useful lives of the related assets as follows:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Vehicles............................................ 5
Radio Equipment..................................... 5 - 10
Office furniture and equipment...................... 5
</TABLE>
Income Taxes -- Deferred tax assets and liabilities, if any, are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases using the liability method. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The Companies had no deferred tax assets or liabilities at
December 31, 1994 and 1995 and March 31, 1996.
Cash and Cash Equivalents -- The Company considers all highly liquid debt
instruments with a maturity of three months or less when purchased to be cash
equivalents.
Accounting Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. REVENUES FROM SIGNIFICANT CUSTOMERS
Revenues from five customers accounted for approximately 20% of the
Companies' revenues for the years ended December 31, 1994 and 1995 and for the
three months ended March 31, 1995 and 1996.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Vehicles................................................. $ 29 $ 29 $ 14
Radio equipment.......................................... 55 57 61
Office furniture and equipment........................... 72 69 71
---- ---- -----
156 155 146
Less: Accumulated depreciation........................... 94 105 100
---- ---- -----
$ 62 $ 50 $ 46
==== ==== =====
</TABLE>
F-75
<PAGE> 131
SEIDEL DELIVERY
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
4. RELATED PARTY TRANSACTIONS
The Companies paid building rent to their shareholder during the years
ended December 31, 1994 and 1995 and the three months ended March 31, 1995 and
1996, totalling $42,000, $37,800, $10,500 (unaudited), and $10,500 (unaudited),
respectively.
The Companies paid certain license rental fees totaling $4,000 to a company
wholly-owned by their shareholder during 1994.
5. PENDING TRANSACTION
In March 1996, the shareholder entered into an agreement of intent for the
sale of 100% of the Companies common stock to an unrelated third party.
F-76
<PAGE> 132
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF ANY OFFER TO BUY COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 11
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Pro Forma Financial Information....... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 27
Management............................ 37
Certain Transactions.................. 43
Principal Stockholders................ 45
Description of Capital Stock.......... 46
Shares Eligible For Future Sale....... 49
Underwriting.......................... 51
Legal Matters......................... 52
Experts............................... 52
Additional Information................ 53
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,100,000 SHARES
[DYNAMEX LOGO]
COMMON STOCK
------------------------------
PROSPECTUS
, 1996
------------------------------
WILLIAM BLAIR & COMPANY
HOAK SECURITIES CORP.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amount shown are estimates
except the Securities and Exchange Commission registration and NASD filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 14,752
NASD filing fee........................................................... 4,778
Nasdaq National Market listing fee........................................ 33,274
Legal fees and expenses................................................... 150,000
Accounting fees and expenses.............................................. 275,000
Printing and engraving expenses........................................... 175,000
Transfer agent and registrar fees and expenses............................ 10,000
Blue Sky fees and expenses................................................ 15,000
Miscellaneous expenses.................................................... 122,196
--------
Total........................................................... $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation eliminates to the
fullest extent permissible under the General Corporation Law of Delaware the
liability of directors to the Company and the stockholders for monetary damages
for breach of fiduciary duty as a director. This provision does not eliminate
liability (a) for any breach of a director's duty of loyalty to the Company or
its stockholders; (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (c) in connection with
payment of any illegal dividend or illegal stock repurchase; or (d) for any
transaction from which the director derives an improper personal benefit. In
addition, these provisions do not apply to equitable remedies such as injunctive
relief.
The Company's Bylaws provide that the Company shall indemnify each of its
directors and officers, acting in such capacity, so long as such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Company. Such indemnification may be made only upon
a determination that such indemnification is proper in the circumstances because
the person to be indemnified has met the applicable standard of conduct to
permit indemnification under the law. The Company is also required to advance to
such persons payment for their expenses incurred in defending a proceeding to
which indemnification might apply, provided the recipient provides an
undertaking agreeing to repay all such advanced amounts if it is ultimately
determined that he is not entitled to be indemnified.
The Company also maintains a directors' and officers' liability insurance
policy insuring directors and officers of the Company for up to $5.0 million of
covered losses as defined in the policy. Reference is also made to the
indemnification and contribution provisions of the Underwriting Agreement filed
as an exhibit to this Registration Statement. The Company has entered into
Indemnification Agreements with each of its directors and certain of its
officers contractually requiring the Company to provide such indemnification to
the extent permitted by applicable law.
Pursuant to the Underwriting Agreement to be entered among the Company and
the Underwriters, officers and directors of the Company are indemnified for
certain liabilities, including liabilities incurred under the Securities Act of
1933, as amended.
II-1
<PAGE> 134
ITEM 15. RECENT SALE OF UNREGISTERED SECURITIES
Since August 1, 1992, the Company has sold or issued the following
unregistered securities:
1. On November 16, 1993, (i) the Company declared a 17.2542-to-1 stock
dividend on the shares of Common Stock outstanding as of such date; (ii)
the Company issued to George M. Siegel 30,912 shares of Common Stock at a
purchase price of $3.24 per share, which purchase price was payable by Mr.
Siegel pursuant to a promissory note issued by Mr. Siegel to the Company on
such date; (iii) the Company issued to Cypress 1,236,096 shares of the
Company's convertible preferred stock and 309,024 shares of the Company's
Common Stock at a purchase price of $3.24 per share, which purchase price
was paid in cash by Cypress; and (iv) the Company issued to McFarland,
Grossman & Co. ("MGC") 5,000 shares of Common Stock at a purchase price of
$3.24 per share, which purchase price was paid in cash by MGC.
2. On May 31, 1995, at a purchase price of $4.25 per share (i) Cypress
converted its shares of convertible preferred stock and the dividends and
interest accrued thereon into Common Stock; (ii) the Company issued to
Cypress 294,116 shares of Common Stock, which purchase price was paid in
cash by Cypress; (ii) the Company issued to Preferred Risk Life Insurance
Company 147,056 shares and Preferred Risk Mutual Insurance Company
purchased 147,060 shares of Common Stock, which purchase prices were paid
in cash by such entities; and (iii) George M. Siegel purchased 20,000
shares of Common Stock, which purchase price was payable by Mr. Siegel
pursuant to a promissory note issued by Mr. Siegel to the Company on such
date.
3. On December 28, 1995, the Company issued and delivered
approximately $1.8 million of Bridge Notes to James M. Hoak, approximately
$1.0 million of Bridge Notes to Cypress, and approximately $1.8 million of
Bridge Notes to various limited partners of Cypress and affiliates of its
general partner in exchange for cash in the corresponding amounts. The
holders of the Bridge Notes received the Bridge Warrants which enable the
holders to purchase an aggregate of 1,080,000 shares of Common Stock at a
price of $.025 per share, which number of shares shall be reduced to
540,000 in the event that the Company has redeemed the Bridge Notes by June
30, 1996, which such date shall be extended to a date no later than
December 31, 1996 if the Company is actively engaged in the initial public
offering process during such time.
5. As partial consideration for consummation of the Acquisitions, the
Company will issue and aggregate of 126,170 shares of Common Stock
(assuming an initial public offering price of $11.00) to the stockholders
of the Acquired Companies.
6. Between August 1, 1992 and April 30, 1996, the Company granted
options to approximately six persons or entities, as the case may be, to
purchase an aggregate of 226,384 shares of the Company's Common Stock
pursuant to the Option Plan for purchase prices ranging from $3.19 to $4.25
per share. Options to purchase 17,000 shares have expired. In connection
with the Offering, the Company intends to grant options to 13 persons to
purchase an aggregate of 259,000 shares of the Company's Common Stock
pursuant to the Option Plan at the initial public offering price.
In issuing such securities, the Company relied on the exemption from the
registration and prospectus delivery requirements of the Securities Act provided
by Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1(1) -- Form of Underwriting Agreement.
2.1(1) -- Share Purchase Agreement, by and among Dynamex Inc., Action Delivery
and Messenger Service Limited, Nancy Smithers, David Nantau,
Naturally Nova Scotia Health Products Limited and 2306080 Nova Scotia
Limited dated June 20, 1996.
</TABLE>
II-2
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
2.2(2) -- Share Purchase Agreement, by and among Dynamex Inc., Zipper
Transportation Services Ltd., KHB & Associates Ltd, Kenneth Bishop
and Bruce Bishop, dated June 3, 1996.
2.3(2) -- Stock Purchase Agreement, by and among Dynamex Inc., NSK Enterprises,
Inc., Seko Enterprises, Inc., YS Corporation d/b/a Metro Messenger
Service Inc., Attention Messenger Service of Illinois, Inc., Dynamex
Inc., Norman Koppel and Joe Garcia, dated June 3, 1996.
2.4(2) -- Stock Purchase Agreement, by and among Dynamex Inc., Express-It
Acquisition Corp., Express-It Inc., Barry J. Steingard and William
Castor, dated June 3, 1996.
2.5(2) -- Agreement and Plan of Merger, by and among Dynamex Inc., SEI
Acquisition Corp., NCI Acquisition Corp., Seidel Enterprises, Inc,
Now Courier, Inc. and Edward F. Seidel, Jr., dated June 3, 1996.
3.1(2) -- Restated Certificate of Incorporation of Dynamex Inc.
3.2(2) -- Bylaws, as amended and restated, of Dynamex Inc.
4.1(1) -- Rights Agreement between Dynamex Inc. and Harris Trust and Savings
Bank, dated July 5, 1996.
5.1(2) -- Opinion of Crouch & Hallett, L.L.P.
10.1(1) -- Employment Agreement of Richard K. McClelland.
10.2(2) -- Consulting Agreement of George M. Siegel.
10.3(2) -- Dynamex Inc. 1996 Stock Option Plan.
10.4(2) -- Marketing and Transportation Services Agreement, between Purolator
Courier Ltd. and Parcelway Courier Systems Canada Ltd., dated
November 20, 1995.
10.5(2) -- Form of Indemnification and Hold Harmless Agreements with Executive
Officers and Directors.
10.6(2) -- Registration Rights Agreement by and among Dynamex Inc., Cypress,
McFarland Grossman & Co. and George M. Siegel, dated November 16,
1993, as amended by that Amendment No. 1 to Registration Rights
Agreement, dated May 31, 1995.
10.7(2) -- Registration Rights Agreement, by and among Dynamex Inc., Preferred
Risk Mutual Insurance Company, Preferred Life Insurance Company and
Richard K. McClelland, dated May 31, 1995.
10.8(1) -- Amended and Restated Credit Agreement by and among the Company and
NationsBank of Texas, N.A., as agent for the lenders named therein,
dated July 5, 1996.
10.9(2) -- Subordinated Renewal Promissory Note, payable by Dynamex Inc. to Air
Canada, in the original principal amount of Cdn $3,225,000, dated
December 28, 1995.
10.10(2) -- Form of Junior Subordinated Debenture, payable by Dynamex Inc., dated
December 28, 1995.
10.11(2) -- Form of Dynamex Inc. Common Stock Purchase Warrant, dated December
28, 1995.
10.12(2) -- Asset Purchase Agreement by and among Dynamex Operations East, Inc.,
Dynamex Operations West, Inc., Parcelway Courier Systems Canada Ltd.,
Mayne Nickless Incorporated, Mayne Nickless Canada Inc., Mayne
Nickless Courier Systems, Inc., Mayne Nickless Messenger Services,
Inc. and Mayne Nickless Transport Inc., dated December 29, 1995.
10.13(2) -- Asset Purchase Agreement by and among Parcelway Courier Systems
Canada Ltd. and Air Canada, dated May 31, 1995.
11.1(2) -- Statement re computation of earnings per share.
</TABLE>
II-3
<PAGE> 136
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
21.1(2) -- Subsidiaries of the Registrant.
23.1(1) -- Independent Auditors' Consent of Deloitte & Touche.
23.2(1) -- Independent Auditors' Consent of Deloitte & Touche LLP.
23.3(1) -- Independent Auditors' Consent of Price Waterhouse.
23.4(2) -- Consent of Crouch & Hallett, L.L.P. (included in Exhibit 5.1).
23.5(2) -- Consent of Kenneth Bishop as Nominee Director of Dynamex Inc.
23.6(2) -- Consent of E. T. Whalen as Nominee Director of Dynamex Inc.
24.1(2) -- Power of Attorney (included on page II-5).
</TABLE>
- ---------------
(1) Filed herewith
(2) Previously filed
(b) Financial Schedules and Reports of Independent Auditors are as follows:
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising from the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE> 137
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the Registrant
has duly caused this amendment to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas on the 9th day of July, 1996.
DYNAMEX INC.
By: /s/ ROBERT P. CAPPS
--------------------------------
Robert P. Capps, Vice
President-Finance
and Corporate Development
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this Registration Statement has been signed by the following persons in the
capacities on the 9th day of July, 1996.
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
* President, Chief Executive Officer and
- --------------------------------------------- Chairman of the Board (Principal Executive
Richard K. McClelland Officer)
/s/ ROBERT P. CAPPS Vice President-Finance and Corporate
- --------------------------------------------- Development (Principal Financial Officer)
Robert P. Capps
* Controller and Secretary (Principal
- --------------------------------------------- Accounting Officer)
Martin A. Piccolo
* Director
- ---------------------------------------------
James M. Hoak
* Director
- ---------------------------------------------
Wayne Kern
* Director
- ---------------------------------------------
Stephen P. Smiley
* Director
- ---------------------------------------------
Brian J. Hughes
*By /s/ ROBERT P. CAPPS
- ---------------------------------------------
Robert P. Capps
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 138
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1(1) -- Form of Underwriting Agreement.
2.1(1) -- Share Purchase Agreement, by and among Dynamex Inc., Action Delivery
and Messenger Service Limited, Nancy Smithers, David Nantau,
Naturally Nova Scotia Health Products Limited and 2306080 Nova Scotia
Limited dated June 20, 1996.
2.2(2) -- Share Purchase Agreement, by and among Dynamex Inc., Zipper
Transportation Services Ltd., KHB & Associates Ltd, Kenneth Bishop
and Bruce Bishop, dated June 3, 1996.
2.3(2) -- Stock Purchase Agreement, by and among Dynamex Inc., NSK Enterprises,
Inc., Seko Enterprises, Inc., YS Corporation d/b/a Metro Messenger
Service Inc., Attention Messenger Service of Illinois, Inc., Dynamex
Inc., Norman Koppel and Joe Garcia, dated June 3, 1996.
2.4(2) -- Stock Purchase Agreement, by and among Dynamex Inc., Express-It
Acquisition Corp., Express-It Inc., Barry J. Steingard and William
Castor, dated June 3, 1996.
2.5(2) -- Agreement and Plan of Merger, by and among Dynamex Inc., SEI
Acquisition Corp., NCI Acquisition Corp., Seidel Enterprises, Inc,
Now Courier, Inc. and Edward F. Seidel, Jr., dated June 3, 1996.
3.1(2) -- Restated Certificate of Incorporation of Dynamex Inc.
3.2(2) -- Bylaws, as amended and restated, of Dynamex Inc.
4.1(1) -- Rights Agreement between Dynamex Inc. and Harris Trust and Savings
Bank, dated July 5, 1996.
5.1(2) -- Opinion of Crouch & Hallett, L.L.P.
10.1(1) -- Employment Agreement of Richard K. McClelland.
10.2(2) -- Consulting Agreement of George M. Siegel.
10.3(2) -- Dynamex Inc. 1996 Stock Option Plan.
10.4(2) -- Marketing and Transportation Services Agreement, between Purolator
Courier Ltd. and Parcelway Courier Systems Canada Ltd., dated
November 20, 1995.
10.5(2) -- Form of Indemnification and Hold Harmless Agreements with Executive
Officers and Directors.
10.6(2) -- Registration Rights Agreement by and among Dynamex Inc., Cypress,
McFarland Grossman & Co. and George M. Siegel, dated November 16,
1993, as amended by that Amendment No. 1 to Registration Rights
Agreement, dated May 31, 1995.
10.7(2) -- Registration Rights Agreement, by and among Dynamex Inc., Preferred
Risk Mutual Insurance Company, Preferred Life Insurance Company and
Richard K. McClelland, dated May 31, 1995.
10.8(1) -- Amended and Restated Credit Agreement by and among the Company and
NationsBank of Texas, N.A., as agent for the lenders named therein,
dated July 5, 1996.
10.9(2) -- Subordinated Renewal Promissory Note, payable by Dynamex Inc. to Air
Canada, in the original principal amount of Cdn $3,225,000, dated
December 28, 1995.
</TABLE>
<PAGE> 139
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.10(2) -- Form of Junior Subordinated Debenture, payable by Dynamex Inc., dated
December 28, 1995.
10.11(2) -- Form of Dynamex Inc. Common Stock Purchase Warrant, dated December
28, 1995.
10.12(2) -- Asset Purchase Agreement by and among Dynamex Operations East, Inc.,
Dynamex Operations West, Inc., Parcelway Courier Systems Canada Ltd.,
Mayne Nickless Incorporated, Mayne Nickless Canada Inc., Mayne
Nickless Courier Systems, Inc., Mayne Nickless Messenger Services,
Inc. and Mayne Nickless Transport Inc., dated December 29, 1995.
10.13(2) -- Asset Purchase Agreement by and among Parcelway Courier Systems
Canada Ltd. and Air Canada, dated May 31, 1995.
11.1(2) -- Statement re computation of earnings per share.
21.1(2) -- Subsidiaries of the Registrant.
23.1(1) -- Independent Auditors' Consent of Deloitte & Touche.
23.2(1) -- Independent Auditors' Consent of Deloitte & Touche LLP.
23.3(1) -- Independent Auditors' Consent of Price Waterhouse.
23.4(2) -- Consent of Crouch & Hallett, L.L.P. (included in Exhibit 5.1).
23.5(2) -- Consent of Kenneth Bishop as Nominee Director of Dynamex Inc.
23.6(2) -- Consent of E. T. Whalen as Nominee Director of Dynamex Inc.
24.1(2) -- Power of Attorney (included on page II-5).
</TABLE>
- ---------------
(1) Filed herewith
(2) Previously filed
<PAGE> 1
EXHIBIT 1.1
DYNAMEX INC. DRAFT
3,100,000 Shares Common Stock(1)
UNDERWRITING AGREEMENT
______________, 1996
William Blair & Company, L.L.C.
Hoak Securities Corp.
As Representatives of the Several
Underwriters Named in Schedule A
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
SECTION 1. Introductory. Dynamex Inc., a Delaware corporation
("Company"), has an authorized capital stock consisting of 10,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares were outstanding
as of ___________, 1996 and 50,000,000 shares of Common Stock, $.01 par value
per share ("Common Stock"), of which ________ shares were outstanding as of
such date. The Company proposes to issue and sell 3,100,000 shares of its
authorized but unissued Common Stock to the several underwriters named in
Schedule A as it may be amended by the Pricing Agreement hereinafter defined
("Underwriters"), who are acting severally and not jointly. Such total of
3,100,000 shares of Common Stock proposed to be sold by the Company is
hereinafter referred to as the "Firm Shares." In addition, the Company
proposes to grant to the Underwriters an option to purchase up to 465,000
additional shares of Common Stock ("Option Shares") as provided in Section 5
hereof. The Firm Shares and, to the extent such option is exercised, the
Option Shares, are hereinafter collectively referred to as the "Shares." The
Company has adopted a Stockholder Rights Agreement, pursuant to which the
Common Stock, including the Shares, have attached thereto rights ("Rights") to
purchase additional equity securities under certain specified circumstances.
None of the Rights are currently exercisable. All references to the Common
Stock and the Shares herein shall be deemed to include the related Rights
attached thereto.
You have advised the Company and its controlling stockholder, Cypress
Capital Partners I, L.P. ("Cypress") that the Underwriters propose to make a
public offering of their respective portions of the Shares as soon as you deem
advisable after the registration statement hereinafter referred to becomes
effective, if it has not yet become effective, and the Pricing Agreement
hereinafter defined has been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company, Cypress and the Representatives, acting on behalf of
the several Underwriters, shall enter into an agreement substantially in the
form of Exhibit A hereto (the "Pricing
- ---------------
(1) Plus an option to acquire up to 465,000 additional shares to
cover overallotments.
<PAGE> 2
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written telecommunication between the Company, Cypress and the
Representatives and shall specify such applicable information as is indicated
in Exhibit A hereto. The offering of the Shares will be governed by this
Agreement, as supplemented by the Pricing Agreement. From and after the date
of the execution and delivery of the Pricing Agreement, this Agreement shall be
deemed to incorporate the Pricing Agreement.
The Company and Cypress hereby confirm their agreements with the
Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No.
333-_______) and a related preliminary prospectus with respect to the
Shares have been prepared and filed with the Securities and Exchange
Commission ("Commission") by the Company in conformity with the
requirements of the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder (collectively, the "1933
Act;" unless indicated to the contrary, all references herein to
specific rules are rules promulgated under the 1933 Act); and the
Company has so prepared and has filed such amendments thereto, if any,
and such amended preliminary prospectuses as may have been required to
the date hereof and will file such additional amendments thereto and
such amended prospectuses as may hereafter be required. There have
been or will promptly be delivered to you three signed copies of such
registration statement and amendments, three copies of each exhibit
filed therewith, and conformed copies of such registration statement
and amendments (but without exhibits) and of the related preliminary
prospectus or prospectuses and final forms of prospectus for each of
the Underwriters.
Such registration statement (as amended, if applicable)
at the time it becomes effective and the prospectus constituting a
part thereof (including the information, if any, deemed to be part
thereof pursuant to Rule 430A(b) and/or Rule 434), as from time to
time amended or supplemented, are hereinafter referred to as the
"Registration Statement," and the "Prospectus," respectively, except
that if any revised prospectus shall be provided to the Underwriters
by the Company for use in connection with the offering of the Shares
which differs from the Prospectus on file at the Commission at the
time the Registration Statement became or becomes effective (whether
or not such revised prospectus is required to be filed by the Company
pursuant to Rule 424(b)), the term Prospectus shall refer to such
revised prospectus from and after the time it was provided to the
Underwriters for such use. If the Company elects to rely on Rule 434
of the 1933 Act, all references to "Prospectus" shall be deemed to
include, without limitation, the form of prospectus and the term
sheet, taken together, provided to the Underwriters by the Company in
accordance with Rule 434 of the 1933 Act ("Rule 434 Prospectus"). Any
registration statement (including any amendment or supplement thereto
or information which is deemed part thereof) filed by the Company
under Rule 462(b) ("Rule 462(b)
2
<PAGE> 3
Registration Statement") shall be deemed to be part of the
"Registration Statement" as defined herein, and any prospectus
(including any amendment or supplement thereto or information which is
deemed part thereof) included in such registration statement shall be
deemed to be part of the "Prospectus," as defined herein, as
appropriate. The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder are hereinafter
collectively referred to as the "Exchange Act."
(b) The Commission has not issued any order preventing or
suspending the use of any preliminary prospectus, and each preliminary
prospectus has conformed in all material respects with the
requirements of the 1933 Act and, as of its date, has not included any
untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein not misleading; and when
the Registration Statement became or becomes effective, and at all
times subsequent thereto, up to the First Closing Date or the Second
Closing Date hereinafter defined, as the case may be, the Registration
Statement, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule
430A(b), if applicable, and the Prospectus and any amendments or
supplements thereto, contained or will contain all statements that are
required to be stated therein in accordance with the 1933 Act and in
all material respects conformed or will in all material respects
conform to the requirements of the 1933 Act, and neither the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, included or will include any untrue statement of a
material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted
from any preliminary prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representatives specifically for
use in the preparation thereof.
(c) The Company and its subsidiaries (as defined in Section
20 hereof) have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
places of incorporation, with the corporate power and authority to own
their properties and conduct their business as described in the
Prospectus; the Company and each of its subsidiaries are duly
qualified to do business as foreign corporations under the corporation
law of, and are in good standing as such in, each jurisdiction in
which they own or lease properties, have an office, or in which
business is conducted and such qualification is required except in any
such case where the failure to so qualify or be in good standing would
not have a material adverse effect upon the condition (financial or
otherwise), business, assets, results of operations or prospects of
the Company and its subsidiaries taken as a whole or upon the
Company's ability to perform its obligations under this Agreement or
upon the validity or consummation of the Acquisitions (as defined in
the Registration Statement) or the transactions contemplated hereby (a
"Material Adverse Effect");
3
<PAGE> 4
and no proceeding of which the Company has knowledge has been
instituted in any such jurisdiction, revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(d) The Company owns, directly or indirectly, 100 percent of
the issued and outstanding capital stock of each of its subsidiaries,
free and clear of any claims, liens, encumbrances or security
interests and all of such capital stock has been duly authorized and
validly issued and is fully paid and nonassessable.
(e) As of the date of this Agreement, the Company has an
authorized and outstanding capitalization as described under the
caption "Capitalization" in the Prospectus. The issued and
outstanding shares of capital stock of the Company as set forth in the
Prospectus have been duly authorized and validly issued, are fully
paid and nonassessable, and conform to the description thereof
contained in the Prospectus; and except as described in the
Prospectus, there is no commitment, plan or arrangement to issue, and
no outstanding option, warrant or other right calling for the issuance
of, any share of capital stock of the Company or any of its
subsidiaries; and except as described in the Prospectus, there is
outstanding no security or other instrument that by its terms is
convertible into or exchangeable for capital stock of the Company or
any of its subsidiaries, and there is no commitment, plan or
arrangement to issue such a security or instrument.
(f) The Shares to be sold by the Company have been duly
authorized and when issued, delivered and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and
will conform to the description thereof contained in the Prospectus.
(g) The making and performance by the Company of this
Agreement and the Pricing Agreement have been duly authorized by all
necessary corporate action and will not violate any provision of the
Company's charter or bylaws and will not result in the breach, or be
in contravention, of any provision of any agreement, franchise,
License (as hereinafter defined), indenture, mortgage, deed of trust,
or other instrument to which the Company or any subsidiary is a party
or by which the Company, any subsidiary or the property of any of them
may be bound or affected, or any order, rule or regulation applicable
to the Company or any subsidiary of any court (foreign, federal,
state, local or otherwise), arbitration or other alternative dispute
forum, foreign, federal, state, local or other government or
governmental department, agency, board, commission, bureau or
instrumentality or other regulatory authority (collectively,
"Governmental Authority") having jurisdiction over the Company or any
subsidiary or any of their respective properties, or any order of any
Governmental Authority entered in any proceeding to which the Company
or any subsidiary was or is now a party or by which it is bound. No
consent, approval, authorization or other order of any Governmental
Authority is required for the execution and delivery of this Agreement
or the Pricing Agreement or the consummation of the transactions
contemplated herein or therein, except for
4
<PAGE> 5
compliance with the 1933 Act and state or province securities laws
applicable to the public offering of the Shares by the several
Underwriters and clearance of such offering with the National
Association of Securities Dealers, Inc. ("NASD"). This Agreement has
been duly executed and delivered by the Company.
(h) Each of Deloitte & Touche LLP and Price Waterhouse LLP,
who have expressed their respective opinions with respect to certain
of the financial statements and schedules included in the Registration
Statement, are independent accountants as required by the 1933 Act.
(i) The consolidated financial statements and schedules of
the Company included in the Registration Statement, including the
notes thereto, present fairly the consolidated financial position of
the Company as of the respective dates of such financial statements,
and the consolidated results of operations and cash flows of the
Company for the respective periods covered thereby, all in conformity
with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed in the
Prospectus; the financial statements and schedules of Dynamex Express
Inc., Mayne Nickless Courier and the Acquired Companies included in
the Registration Statement, including the notes thereto, present
fairly the financial position of Dynamex Express Inc., Mayne Nickless
Courier and the Acquired Companies as of the respective dates of such
financial statements, and the consolidated results of operations and
cash flows of Dynamex Express Inc., Mayne Nickless Courier and the
Acquired Companies for the respective periods covered thereby, all in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed in the
Prospectus; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated
therein. The financial information set forth in the Prospectus under
the captions "Summary Consolidated Financial Data" and "Selected
Consolidated Financial Data" presents fairly on the basis stated in
the Prospectus, the information set forth therein; and the pro forma
financial statements and other pro forma information included in the
Prospectus present fairly the information shown therein, have been
prepared in accordance with generally accepted accounting principles
and the Commission's rules and guidelines with respect to pro forma
financial statements and other pro forma information, have been
properly compiled on the pro forma basis described therein, and, in
the opinion of the Company, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate under the circumstances.
(j) Neither the Company nor any subsidiary is in violation of
its charter or bylaws or in default under any consent decree, order,
writ, judgment, award or injunction of any Governmental Authority, or
in default with respect to any material provision of any lease, loan
agreement, note, franchise, License (as hereinafter defined), permit,
provider agreement, employer group agreement, third-party payor
agreement, or other contract obligation to which it is a party; and
there does not exist any state of facts which constitutes an event of
default as defined in such documents
5
<PAGE> 6
or which, with notice or lapse of time or both, would constitute such
an event of default, in each case, except for defaults which neither
singly nor in the aggregate are material to the Company and its
subsidiaries taken as a whole.
(k) There are no material legal or governmental proceedings
pending, or to the Company's knowledge, threatened to which the
Company or any subsidiary is or may be a party or of which material
property owned or leased by the Company or any subsidiary is or may be
the subject, or which are related to environmental or discrimination
matters which are not disclosed in the Prospectus, or which question
the validity of this Agreement or the Pricing Agreement or any action
taken or to be taken pursuant hereto or thereto.
(l) Except as described in the Prospectus, there are no
holders of securities of the Company having rights to registration
thereof, preemptive rights or rights of first refusal to purchase
Common Stock from the Company. Holders of registration rights have
waived such rights with respect to the offering being made by the
Prospectus.
(m) The Company and each of its subsidiaries have good and
marketable title to all the properties and assets reflected as owned
in the financial statements hereinabove described (or elsewhere in the
Prospectus), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those, if any, reflected in such
financial statements (or elsewhere in the Prospectus) or which are not
material to the Company and its subsidiaries taken as a whole. The
Company and each of its subsidiaries hold their respective leased
properties which are material to the Company and its subsidiaries
taken as a whole under valid and binding leases.
(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.
(o) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and
except as contemplated by the Prospectus, the Company and its
subsidiaries, taken as a whole, have not incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there
has not been any material adverse change in their condition (financial
or otherwise), business, assets, results of operations or prospects
nor any material change in their capital stock, short-term debt or
long-term debt. Except as disclosed in writing to the Representatives
prior to the date hereof, neither the Company nor any of its
subsidiaries has received notice (either formally or informally) of
the non-renewal or anticipated non-renewal of one or more contracts
currently maintained by the
6
<PAGE> 7
Company or any of its subsidiaries with any of its customers, which
non-renewal(s) would or could be expected to have a Material Adverse
Effect.
(p) There is no material document of a character required to
be described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not
described or filed as required.
(q) The Company or its subsidiaries own and possess all
right, title and interest in and to, or has duly licensed from third
parties a valid, enforceable right to use, all patents, patent rights,
trade secrets, inventions, know-how, trademarks, trade names,
copyrights, service marks and other proprietary rights ("Trade
Rights") material to the business of the Company and each of its
subsidiaries taken as a whole. Neither the Company nor any of its
subsidiaries has received any notice of infringement, misappropriation
or conflict from any third party as to such material Trade Rights
which has not been resolved or disposed of and neither the Company nor
any of its subsidiaries has infringed, misappropriated or otherwise
conflicted with material Trade Rights of any third parties, which
infringement, misappropriation or conflict would have a Material
Adverse Effect.
(r) The conduct of the business of the Company and each of
its subsidiaries is in compliance in all respects with applicable
foreign, federal, state, local and other laws and regulations, except
where the failure to be in compliance would not have a Material
Adverse Effect. The Company has no knowledge of, nor has the Company
received notice of, any violation or alleged violation by the Company
or any of its subsidiaries of any such laws or regulations.
(s) All offers and sales of the Company's and each of its
subsidiaries' capital stock prior to the date hereof were at all
relevant times exempt from the registration requirements of the 1933
Act and were duly registered with or the subject of an available
exemption from the registration requirements of the applicable state
or province securities laws.
(t) The Company and each of its subsidiaries have filed all
necessary foreign, federal and state income, franchise, value-added,
sales and use and similar tax returns and have paid all taxes shown as
due thereon, and there is no tax deficiency that has been, or to the
knowledge of the Company might be, asserted against the Company, or
any of its subsidiaries, or any of their respective properties or
assets that would or could be expected to have a Material Adverse
Effect.
(u) The Company has filed a registration statement pursuant
to Section 12(g) of the Exchange Act to register the Common Stock
thereunder, has filed an application to list the Shares on the Nasdaq
National Market and has received notification that the listing has
been approved, subject to notice of issuance or sale of the Shares, as
the case may be.
7
<PAGE> 8
(v) The Company and each of its subsidiaries are not, and do
not intend to conduct their respective businesses in a manner in which
any of them would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended
("Investment Company Act").
(w) The Company confirms as of the date hereof that it and
each of its subsidiaries is in compliance with all provisions of
Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of Doing Business with Cuba, and the Company further agrees
that if it or any of its subsidiaries commences engaging in business
with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become
effective with the Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if
the information reported in the Prospectus, if any, concerning the
Company's business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the
Department notice of such business or change, as appropriate, in a
form acceptable to the Department.
(x) The Company and each of its subsidiaries has obtained all
licenses, permits, certificates, authorizations, approvals or consents
(collectively, the "Licenses") required by any Governmental Authority
to properly and legally operate or conduct the business in which it is
engaged on the date hereof and which are necessary or desirable for
the successful conduct of its business as conducted and as proposed to
be conducted. Each License has been duly obtained, is valid and in
full force and effect, is renewable by its terms or in the ordinary
course of business without the need to comply with any special
qualifications or procedures or to pay any amount other than routine
filing fees. Neither the Company nor any of its subsidiaries (i) is
subject to any pending or threatened administrative or judicial
proceeding to revoke, cancel or declare any License granted to it
invalid in any respect, (ii) is acting outside the scope and authority
granted to it pursuant to any such License, or otherwise is in default
or in violation with respect to any such License, and no event has
occurred which constitutes, or with due notice or lapse of time or
both may constitute, a default by it or a violation of, any License
and (iii) has permitted any License granted to it to lapse since its
original effective date, except where such lapse did not have a
Material Adverse Effect. The Company and its subsidiaries have
completed and submitted, on a timely basis, all reports and filings
associated with their businesses as are required by any Governmental
Authority.
(y) The consummation of the Acquisitions and the execution,
delivery and performance of all documents and instruments executed and
delivered in connection therewith were authorized by all necessary
corporate action on the part of Company; all consents, approvals,
authorizations, orders, licenses, certificates, permits, registrations
or qualifications required to be obtained in connection with the
Acquisitions have been obtained, other than such consents, approvals,
authorizations, orders, licenses, certificates, permits, registrations
or qualifications which,
8
<PAGE> 9
individually or in the aggregate, would not have a Material Adverse
Effect; the consummation of the Acquisitions will not (i) conflict
with or result in a breach or violation of any of terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries was or is bound or to which any of
the property or assets of the Company or any of its subsidiaries was
or is subject, (ii) result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any of its
subsidiaries or (iii) result in any violation of the provisions of any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties, other than, in the case of
clauses (i) and (iii) above, such conflicts, breaches, violations or
defaults that, individually or in the aggregate, would not have a
Material Adverse Effect;
SECTION 3. Representations, Warranties and Covenants of Cypress.
(a) Cypress represents and warrants to, and agrees with, the
Company and the Underwriters as follows:
(i) This Agreement and the Pricing Agreement
have been duly authorized, executed and delivered by or on
behalf of Cypress; and the performance of this Agreement and
the Pricing Agreement and the consummation of the transactions
herein contemplated by Cypress will not result in a breach or
violation of any of the terms and provisions of, or constitute
a default under, any statute, agreement, franchise, License,
indenture, mortgage, deed of trust, note agreement or other
agreement or instrument to which Cypress is a party or by
which any are bound or to which any of the property of Cypress
is subject, or any order, rule or regulation of any
Governmental Authority having jurisdiction over Cypress or any
of its properties; and no consent, approval, authorization or
order of any Governmental Authority having jurisdiction over
Cypress or any of its properties is required for the
consummation of the transactions contemplated by this
Agreement and the Pricing Agreement in connection with the
sale of Shares hereunder, except such as have been obtained
under the 1933 Act and such as may be required under
applicable state or province securities laws in connection
with the purchase and distribution of such Shares by the
Underwriters and the clearance of such offering with the NASD;
(ii) Cypress has, and on the First Closing Date
or the Second Closing Date (as hereinafter defined), as the
case may be, will have, full right, power and authority to
enter into this Agreement and the Pricing Agreement; this
Agreement and the Pricing Agreement are legal, valid and
binding agreements of Cypress except as enforceability of the
same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
and by the exercise of judicial discretion in accordance with
9
<PAGE> 10
general principles applicable to equitable and similar
remedies and except with respect to those provisions relating
to indemnities for liabilities arising under the 1933 Act, as
to which no opinion need be expressed;
(ii) Cypress has not taken and will not take, directly
or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act
or otherwise, in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale
of the Shares.
(b) Cypress represents and warrants to, and agrees with, the
Company and the Underwriters to the same effect as the representations
and warranties of the Company set forth in Section 2 of this
Agreement.
SECTION 4. Representations and Warranties of the Underwriters. The
Representatives, on behalf of the several Underwriters, represent and warrant
to the Company that the information set forth (a) on the cover page of the
Prospectus with respect to price, underwriting discount and terms of the
offering and (b) under "Underwriting" in the Prospectus was furnished to the
Company by and on behalf of the Underwriters for use in connection with the
preparation of the Registration Statement and is correct and complete in all
material respects.
SECTION 5. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters named in Schedule A hereto, and the Underwriters agree, severally
and not jointly, to purchase from the Company 3,100,000 Firm Shares at the
price per share set forth in the Pricing Agreement. The obligation of each
Underwriter to the Company shall be to purchase from the Company that number of
Shares set forth opposite the name of such Underwriter in Schedule A hereto.
The initial public offering price and the purchase price shall be set forth in
the Pricing Agreement.
At 9:00 A.M., Chicago Time, on the fourth business day, if permitted
under Rule 15c6-1 under the Exchange Act, (or the third business day if
required under Rule 15c6-1 under the Exchange Act or unless postponed in
accordance with the provisions of Section 12) following the date the
Registration Statement becomes effective (or, if the Company has elected to
rely upon Rule 430A, the fourth business day, if permitted under Rule 15c6-1
under the Exchange Act, (or the third business day if required under Rule
15c6-1 under the Exchange Act) after execution of the Pricing Agreement), or
such other time not later than ten business days after such date as shall be
agreed upon by the Representatives and the Company, the Company and the
Custodian will deliver to you at the offices of counsel for the Underwriters or
through the facilities of The Depository Trust Company for the accounts of the
several Underwriters, certificates representing the Firm Shares to be sold by
them, respectively, against payment of the purchase price therefor by delivery
of federal or other immediately available funds, by wire transfer or otherwise,
to the Company and the
10
<PAGE> 11
Custodian. Such time of delivery and payment is herein referred to as the
"First Closing Date." The certificates for the Firm Shares so to be delivered
will be in such denominations and registered in such names as you request by
notice to the Company and the Custodian prior to 10:00 A.M., Chicago Time, on
the second business day preceding the First Closing Date, and will be made
available at the Company's expense for checking and packaging by the
Representatives at 10:00 A.M., Chicago Time, on the business day preceding the
First Closing Date. Payment for the Firm Shares so to be delivered shall be
made at the time and in the manner described above at the offices of counsel
for the Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 465,000 Option
Shares, at the same purchase price per share to be paid for the Firm Shares,
for use solely in covering any overallotments made by the Underwriters in the
sale and distribution of the Firm Shares. The option granted hereunder may be
exercised at any time (but not more than once) within 30 days after the date of
the initial public offering upon notice by you to the Company setting forth the
aggregate number of Option Shares as to which the Underwriters are exercising
the option, the names and denominations in which the certificates for such
shares are to be registered and the time and place at which such certificates
will be delivered. Such time of delivery (which may not be earlier than the
First Closing Date), being herein referred to as the "Second Closing Date,"
shall be determined by you, but if at any time other than the First Closing
Date, shall not be earlier than three nor later than 10 full business days
after delivery of such notice of exercise. The number of Option Shares to be
purchased by each Underwriter shall be determined by multiplying the number of
Option Shares to be sold by the Company pursuant to such notice of exercise by
a fraction, the numerator of which is the number of Firm Shares to be purchased
by such Underwriter as set forth opposite its name in Schedule A and the
denominator of which is the total number of Firm Shares (subject to such
adjustments to eliminate any fractional share purchases as you in your absolute
discretion may make). Certificates for the Option Shares will be made
available at the Company's expense for checking and packaging at 10:00 A.M.,
Chicago time, on the business day preceding the Second Closing Date. The
manner of payment for and delivery of the Option Shares shall be the same as
for the Firm Shares as specified in the preceding paragraph.
You have advised the Company that each Underwriter has authorized you
to accept delivery of its Shares, to make payment and to receipt therefor.
You, individually and not as the Representatives of the Underwriters, may make
payment for any Shares to be purchased by any Underwriter whose funds shall not
have been received by you by the First Closing Date or the Second Closing Date,
as the case may be, for the account of such Underwriter, but any such payment
shall not relieve such Underwriter from any obligation hereunder.
SECTION 6. Covenants of the Company. The Company covenants and agrees
that:
11
<PAGE> 12
(a) The Company will advise you promptly of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for
that purpose, or of any notification of the suspension of
qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceedings for that purpose, and
will also advise you promptly of any request of the Commission for
amendment or supplement of the Registration Statement, of any
preliminary prospectus or of the Prospectus, or for additional
information.
(b) The Company will give you notice of its intention to file
or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any Rule 462(b) Registration Statement or
any amendment or supplement to the Prospectus (including any revised
prospectus which the Company proposes for use by the Underwriters in
connection with the offering of the Shares which differs from the
prospectus on file at the Commission at the time the Registration
Statement became or becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) and any
term sheet as contemplated by Rule 434) and will furnish you with
copies of any such amendment or supplement a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not
file any such amendment or supplement or use any such prospectus to
which you or counsel for the Underwriters shall reasonably object.
(c) If the Company elects to rely on Rule 434 of the 1933
Act, the Company will prepare a term sheet that complies with the
requirements of Rule 434. If the Company elects not to rely on Rule
434, the Company will provide the Underwriters with copies of the form
of prospectus, in such numbers as the Underwriters may reasonably
request, and file with the Commission such prospectus in accordance
with Rule 424(b) of the 1933 Act by the close of business in New York
City on the second business day immediately succeeding the date of the
Pricing Agreement. If the Company elects to rely on Rule 434, the
Company will provide the Underwriters with copies of the form of Rule
434 Prospectus, in such numbers as the Underwriters may reasonably
request, by the close of business in New York on the business day
immediately succeeding the date of the Pricing Agreement.
(d) If at any time when a prospectus relating to the Shares
is required to be delivered under the 1933 Act any event occurs as a
result of which the Prospectus, including any amendments or
supplements, would include an untrue statement of a material fact, or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus, including
any amendments or supplements thereto and including any revised
prospectus which the Company proposes for use by the Underwriters in
connection with the offering of the Shares which differs from the
prospectus on file with the Commission at the time of effectiveness of
the Registration Statement, whether or not such revised prospectus is
required to be filed
12
<PAGE> 13
pursuant to Rule 424(b) to comply with the 1933 Act, the Company
promptly will advise you thereof and will promptly prepare and file
with the Commission an amendment or supplement (in form and substance
satisfactory to counsel for the Underwriters) which will correct such
statement or omission or an amendment which will effect such
compliance; and, in case any Underwriter is required to deliver a
prospectus nine months or more after the effective date of the
Registration Statement, the Company upon request, but at the expense
of such Underwriter, will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the 1933 Act.
(e) Neither the Company nor any of its subsidiaries will,
prior to the earlier of the Second Closing Date or termination or
expiration of the option relating to the Option Shares, incur any
liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business,
except as contemplated by the Prospectus.
(f) Neither the Company nor any of its subsidiaries will
acquire any capital stock of the Company prior to the earlier of the
Second Closing Date or termination or expiration of the option
relating to the Option Shares nor will the Company declare or pay any
dividend or make any other distribution upon the Common Stock payable
to stockholders of record on a date prior to the earlier of the Second
Closing Date or termination or expiration of the option relating to
the Option Shares, except in either case as contemplated by the
Prospectus.
(g) As soon as practicable, but in any event not later than
15 months after the effective date of the Registration Statement, the
Company will make generally available to its security holders an
earnings statement (which need not be audited) covering a period of at
least 12 months beginning after the effective date of the Registration
Statement, which will satisfy the provisions of the last paragraph of
Section 11(a) of the 1933 Act.
(h) During such period as a prospectus is required by law to
be delivered in connection with offers and sales of the Shares by an
Underwriter or dealer, the Company will furnish to you at its expense,
subject to the provisions of subsection (d) hereof, copies of the
Registration Statement, the Prospectus, each preliminary prospectus
and all amendments and supplements to any such documents in each case
as soon as available and in such quantities as you may reasonably
request, for the purposes contemplated by the 1933 Act.
(i) The Company will cooperate with the Underwriters in
qualifying or registering the Shares for sale under the state or
province securities laws of such jurisdictions as you designate, and
will continue such qualifications in effect so long as reasonably
required for the distribution of the Shares. In connection with such
qualification or registration of the Shares, the Company shall not be
required to qualify as a foreign corporation or to file a general
consent to service of process in
13
<PAGE> 14
any such jurisdiction where it is not currently qualified or where it
would be subject to taxation as a foreign corporation.
(j) During the period of five years hereafter, the Company
will furnish you and each of the other Underwriters with a copy (i) as
soon as practicable after the filing thereof, of each report filed by
the Company with the Commission, any securities exchange or the NASD,
(ii) as soon as practicable after the release thereof, of each
material press release in respect of the Company, (iii) as soon as
available, of each report of the Company mailed to stockholders and
(iv) any additional information of a public nature concerning the
Company or its business that you may reasonably request.
(k) The Company will use the net proceeds received by it from
the sale of the Shares being sold by it in the manner specified in the
Prospectus.
(l) If, at the time of effectiveness of the Registration
Statement, any information shall have been omitted therefrom in
reliance upon Rule 430A and/or Rule 434, then immediately following
the execution of the Pricing Agreement, the Company will prepare, and
file or transmit for filing with the Commission in accordance with
such Rule 430A, Rule 424(b) and/or Rule 434, copies of an amended
Prospectus, or, if required by such Rule 430A and/or Rule 434, a
post-effective amendment to the Registration Statement (including an
amended Prospectus), containing all information so omitted. If
required, the Company will prepare and file, or transmit for filing, a
Rule 462(b) Registration Statement not later than the date of the
execution of the Pricing Agreement. If a Rule 462(b) Registration
Statement is filed, the Company shall make payment of, or arrange for
payment of, the additional registration fee owing to the Commission
required by Rule 111.
(m) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National
Market which may from time to time be applicable to the Company and
will file with the Commission in a timely manner all reports on Form
SR required by Rule 463 and will furnish you copies of any such
reports as soon as practicable after the filing thereof.
(n) The Company agrees not to sell, contract to sell or
otherwise dispose of any Common Stock or securities convertible into
Common Stock (except Common Stock issued pursuant to currently
outstanding options, warrants or convertible securities) for a period
of 180 days after this Agreement becomes effective without the prior
written consent of the Representatives. The Company has obtained
similar agreements from each of its officers and directors.
(o) The Company will promptly deliver to the Representatives
copies of all correspondence to and from, and all documents issued to
and by, the Commission in connection with the registration of the
Shares under the 1933 Act.
14
<PAGE> 15
(p) Prior to the First Closing Date, the Company will issue
no press release or other communication to the public, directly or
indirectly, with respect to the Company or any of its subsidiaries or
with respect to the financial condition, results of operations,
business, properties, assets or liabilities of any of them, or the
offering of the Shares, without your prior consent, which consent
shall not be unreasonably withheld.
SECTION 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective as
to all of its provisions or is terminated, the Company agrees to pay (i) all
costs, fees and expenses (other than legal fees and disbursements of counsel
for the Underwriters and the expenses incurred by the Underwriters) incurred in
connection with the performance of the Company's obligations hereunder,
including without limiting the generality of the foregoing, all fees and
expenses of legal counsel for the Company and of the Company's independent
accountants, all costs and expenses incurred in connection with the
preparation, printing, filing and distribution of the Registration Statement,
each preliminary prospectus and the Prospectus (including all exhibits and
financial statements) and all amendments and supplements provided for herein,
this Agreement, the Pricing Agreement and the blue sky memorandum, (ii) all
costs, fees and expenses (including legal fees and disbursements of counsel for
the Underwriters) incurred by the Underwriters in connection with qualifying or
registering all or any part of the Shares for offer and sale under applicable
state or province securities laws, including the preparation of a blue sky
memorandum relating to the Shares and clearance of such offering with the NASD;
and (iii) all fees and expenses of the Company's transfer agent, printing of
the certificates for the Shares and all transfer taxes, if any, with respect to
the sale and delivery of the Shares to the several Underwriters.
SECTION 8. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Shares
on the First Closing Date and the Option Shares on the Second Closing Date
shall be subject to the accuracy of the representations and warranties on the
part of the Company and Cypress herein set forth as of the date hereof and as
of the First Closing Date or the Second Closing Date, as the case may be, to
the accuracy of the statements of officers of the Company made pursuant to the
provisions hereof, to the performance by the Company and Cypress of their
respective obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective
either prior to the execution of this Agreement or not later than 1:00
P.M., Chicago Time, on the first full business day after the date of
this Agreement, or such later time as shall have been consented to by
you but in no event later than 1:00 P.M., Chicago Time, on the third
full business day following the date hereof; and prior to the First
Closing Date or the Second Closing Date, as the case may be, no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company,
Cypress or you, shall be contemplated by the Commission. If the
Company has elected to rely upon Rule 430A and/or Rule 434, the
information
15
<PAGE> 16
concerning the initial public offering price of the Shares and
price-related information shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) within the prescribed
period and the Company will provide evidence satisfactory to the
Representatives of such timely filing (or a post-effective amendment
providing such information shall have been filed and declared
effective in accordance with the requirements of Rules 430A and
424(b)). If a Rule 462(b) Registration Statement is required, such
Registration Statement shall have been transmitted to the Commission
for filing and become effective within the prescribed time period and,
prior to the First Closing Date, the Company shall have provided
evidence of such filing and effectiveness in accordance with Rule
462(b).
(b) The Shares shall have been qualified for sale under the
state or province securities laws of such jurisdictions as shall have
been specified by the Representatives.
(c) The legality and sufficiency of the authorization,
issuance and sale or transfer and sale of the Shares hereunder, the
validity and form of the certificates representing the Shares, the
execution and delivery of this Agreement and the Pricing Agreement,
and all corporate proceedings and other legal matters incident
thereto, and the form of the Registration Statement and the Prospectus
(except financial statements) shall have been approved by counsel for
the Underwriters.
(d) You shall not have advised the Company that the
Registration Statement or the Prospectus or any amendment or
supplement thereto, contains an untrue statement of fact, which, in
the opinion of counsel for the Underwriters, is material or omits to
state a fact which, in the opinion of such counsel, is material and is
required to be stated therein or necessary to make the statements
therein not misleading.
(e) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any change, or any
development involving a prospective change, in or affecting
particularly the business or properties of the Company or its
subsidiaries, whether or not arising in the ordinary course of
business, which, in the judgment of the Representatives, makes it
impractical or inadvisable to proceed with the public offering or
purchase of the Shares as contemplated hereby.
(f) There shall have been furnished to you, as
Representatives of the Underwriters, on the First Closing Date or the
Second Closing Date, as the case may be, except as otherwise expressly
provided below:
(i) An opinion of Crouch & Hallett, L.L.P., counsel
for the Company and Cypress, addressed to the Underwriters and
dated the First Closing Date or the Second Closing Date, as
the case may be, to the effect that:
16
<PAGE> 17
(1) the Company has been duly incorporated and
is validly existing as a corporation in good standing
under the laws of the State of Delaware with corporate
power and authority to own its properties and conduct
its business as described in the Prospectus; and the
Company has been duly qualified to do business as a
foreign corporation under the corporation law of, and
is in good standing as such in, every jurisdiction
where the ownership or leasing of property, or the
conduct of its business requires such qualification
except where the failure so to qualify would not have a
Material Adverse Effect;
(2) an opinion to the same general effect as
clause (1) of this subparagraph (i) in respect of each
direct and indirect subsidiary of the Company;
(3) the authorized capital stock of the
Company, of which there is outstanding the amount set
forth in the Registration Statement and Prospectus
(except for subsequent issuances, if any, pursuant to
stock options or other rights referred to in the
Prospectus), conforms as to legal matters in all
material respects to the description thereof in the
Registration Statement and Prospectus; the issued and
outstanding capital stock of the Company has been duly
authorized and validly issued and is fully paid and
nonassessable and free of statutory preemptive rights;
(4) the issued and outstanding capital stock of
each subsidiary of the Company has been duly
authorized, validly issued and is fully paid and
nonassessable and free of statutory preemptive rights,
and the Company owns directly or indirectly 100 percent
of the outstanding capital stock of each subsidiary,
and to the best knowledge of such counsel after due
inquiry and investigation, such stock is owned free and
clear of any claims, liens, encumbrances or security
interests.
(5) the certificates for the Shares to be
delivered hereunder are in due and proper form, and
when duly countersigned by the Company's transfer agent
and delivered to you or upon your order against payment
of the agreed consideration therefor in accordance with
the provisions of this Agreement and the Pricing
Agreement, the Shares represented thereby will be duly
authorized and validly issued, fully paid and
nonassessable and will be free of any pledge, lien,
encumbrance, claim or preemptive rights of, or rights
of first refusal in favor of, stockholders with respect
to any of the Shares or the issuance or sale thereof,
pursuant to the certificate of incorporation or bylaws
of the Company and there are no contractual preemptive
rights, rights of first refusal, rights of co-sale or
other similar rights which exist with respect to any of
the Shares or the issuance and sale thereof;
17
<PAGE> 18
and the Shares to be sold hereunder have been duly and
validly authorized and qualified for inclusion on the
Nasdaq National Market, subject to notice of issuance;
(6) the Registration Statement has become
effective under the 1933 Act, and, to the best
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the
1933 Act, and the Registration Statement (including the
information deemed to be part of the Registration
Statement at the time of effectiveness pursuant to Rule
430A(b) and/or Rule 434, if applicable), the Prospectus
and each amendment or supplement thereto (except for
the financial statements and other statistical or
financial data included therein as to which such
counsel need express no opinion) comply as to form in
all material respects with the requirements of the 1933
Act; such counsel have no reason to believe that either
the Registration Statement (including the information
deemed to be part of the Registration Statement at the
time of effectiveness pursuant to Rule 430A(b) and/or
Rule 434, if applicable) or the Prospectus, or the
Registration Statement or the Prospectus as amended or
supplemented (except for the financial statements and
other statistical or financial data included therein as
to which such counsel need express no opinion), as of
their respective effective or issue dates, contained
any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading
or that the Prospectus as amended or supplemented, if
applicable, as of the First Closing Date or the Second
Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state any
material fact necessary to make the statements therein
not misleading in light of the circumstances under
which they were made; the statements in the
Registration Statement and the Prospectus summarizing
statutes, rules and regulations are accurate and fairly
and correctly present the information required to be
presented by the 1933 Act or the rules and regulations
thereunder, in all material respects and such counsel
does not know of any statutes, rules and regulations
required to be described or referred to in the
Registration Statement or the Prospectus that are not
described or referred to therein as required; and such
counsel does not know of any legal or governmental
proceedings pending or threatened required to be
described in the Prospectus which are not described as
required, nor of any contracts or documents of a
character required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to
the Registration Statement which are not described or
filed, as required;
18
<PAGE> 19
(7) the statements under the captions
"Management -- Employment and Consulting Agreements"
and " -- Stock Option Plan," "Certain Transactions,"
"Description of Capital Stock" and "Shares Eligible for
Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred
to therein or matters of law, are accurate summaries
and fairly and correctly present, in all material
respects, the information required to be disclosed with
respect to such documents and matters by the 1933 Act
and the rules and regulations thereunder;
(8) this Agreement and the Pricing Agreement
and the performance of the Company's obligations
hereunder and thereunder have been duly authorized by
all necessary corporate action and this Agreement and
the Pricing Agreement have been duly executed and
delivered by and on behalf of the Company, and are
legal, valid and binding agreements of the Company,
except as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights and by
the exercise of judicial discretion in accordance with
general principles applicable to equitable and similar
remedies and except as to those provisions relating to
indemnities for liabilities arising under the 1933 Act
as to which no opinion need be expressed; and no
approval, authorization or consent of any Governmental
Authority is necessary in connection with the issue or
sale of the Shares by the Company pursuant to this
Agreement (other than under the 1933 Act, applicable
state or province securities laws and the rules of the
NASD) or the consummation by the Company of any other
transactions contemplated hereby;
(9) to the best of such counsel's knowledge
after due inquiry and investigation, neither the
Company nor any of its subsidiaries is in violation of
its charter or is in breach of, or in default under
(nor has any event occurred which, with notice, lapse
of time or both would constitute a breach of, or
default under) any indenture, lease, credit agreement
or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries respective
properties may be bound are affected, where such
violation or breach or default could have a Material
Adverse Effect;
(10) the execution, delivery and performance of
this Agreement, the issuance and sale of the Shares,
and the consummation of the transactions herein
contemplated by the Company, will not contravene any of
the provisions of, or result in a default under, any
agreement, franchise, License, indenture, mortgage,
deed of trust, or other
19
<PAGE> 20
instrument known to such counsel, of the Company or any
of its subsidiaries or by which the property of any of
them is bound and which contravention or default would
be material to the Company and its subsidiaries taken
as a whole; or violate any of the provisions of the
charter or bylaws of the Company or any of its
subsidiaries or, so far as is known to such counsel,
violate any statute, order, rule or regulation of any
Governmental Authority having jurisdiction over the
Company or any of its subsidiaries;
(11) except as disclosed in the Prospectus no
person has the right, contractual or otherwise, to
cause the Company or any of its subsidiaries to issue,
or register pursuant to the 1933 Act, any shares of
capital stock of the Company or any of its
subsidiaries, upon the issue and sale of the Shares to
be sold by the Company to the Underwriters pursuant to
this Agreement;
(12) to the best of such counsel's knowledge
after due inquiry and investigation, all offers and
sales of the Company's and each of its subsidiaries'
capital stock prior to the date hereof were at all
relevant times exempt from the registration
requirements of the 1933 Act and were duly registered
or the subject of an available exemption from the
registration requirements of applicable state or
province securities laws;
(13) with respect to Cypress, this Agreement
and the Pricing Agreement have been duly authorized,
executed and delivered by or on behalf of Cypress; and
the performance of this Agreement and the Pricing
Agreement and the consummation of the transactions
herein contemplated by Cypress will not result in a
breach or violation of any of the terms and provisions
of, or constitute a default under, any statute,
agreement, franchise, License, indenture, mortgage,
deed of trust, note agreement or other agreement or
instrument known to such counsel to which Cypress is a
party or by which any are bound or to which any of the
property of Cypress is subject, or any order, rule or
regulation known to such counsel of any Governmental
Authority having jurisdiction over Cypress or any of
its properties; and no consent, approval, authorization
or order of any Governmental Authority having
jurisdiction over Cypress or any of its properties is
required for the consummation of the transactions
contemplated by this Agreement and the Pricing
Agreement in connection with the sale of Shares
hereunder, except such as have been obtained under the
1933 Act and such as may be required under applicable
state or province securities laws in connection with
the purchase and distribution of such Shares by the
Underwriters and the clearance of such offering with
the NASD;
20
<PAGE> 21
(14) Cypress has full right, power and
authority to enter into this Agreement and the Pricing
Agreement; this Agreement and the Pricing Agreement are
legal, valid and binding agreements of Cypress except
as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights and by
the exercise of judicial discretion in accordance with
general principles applicable to equitable and similar
remedies and except with respect to those provisions
relating to indemnities for liabilities arising under
the 1933 Act, as to which no opinion need be expressed;
(16) Neither the Company nor any of its
subsidiaries is an "investment company" or a person
"controlled by" an "investment company" within the
meaning of the Investment Company Act;
(17) To the best of such counsel's knowledge
after due inquiry and investigation, the Company and
each of its subsidiaries have obtained all Licenses
required by any Governmental Authority to properly and
legally operate or conduct the businesses in which it
is engaged on the Closing Date and which are necessary
or desirable for the successful conduct of its business
as it is conducted and proposed to be conducted, and
each such License has been duly obtained, is valid and
in full force and effect, and is renewable by its terms
or in the ordinary course of business without the need
to comply with any special qualification procedures or
to pay any amount other than routine filing fees. To
the best of such counsel's knowledge after due inquiry
and investigation, neither the Company nor any of its
subsidiaries (a) is subject to any pending or
threatened administrative or judicial proceeding to
revoke, cancel or declare any License granted to it
invalid in any respect, (b) is acting outside the scope
and authority granted to it pursuant to any such
License, or otherwise is in default or in violation
with respect to any such License, and no event has
occurred which constitutes, or with due notice or lapse
of time or both may constitute, a default by it or a
violation of, any License and (c) has permitted any
License granted to it to lapse since its original
effective date, except where such lapse did not have a
Material Adverse Effect; and
(18) The consummation of the Acquisitions and
the execution, delivery and performance of all
documents and instruments executed and delivered in
connection therewith were authorized by all necessary
corporate action on the part of Company; all consents,
approvals, authorizations, orders, licenses,
certificates, permits, registrations or qualifications
required to be obtained in connection with the
Acquisitions have been obtained, other than such
consents, approvals,
21
<PAGE> 22
authorizations, orders, licenses, certificates,
permits, registrations or qualifications which,
individually or in the aggregate, would not have a
Material Adverse Effect; the consummation of the
Acquisitions will not (i) conflict with or result in a
breach or violation of any of terms or provisions of,
or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its
subsidiaries was or is bound or to which any of the
property or assets of the Company or any of its
subsidiaries was or is subject, (ii) result in any
violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any of its
subsidiaries or (iii) result in any violation of the
provisions of any statute or any order, rule or
regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its
subsidiaries or any of their properties, other than, in
the case of clauses (i) and (iii) above, such
conflicts, breaches, violations or defaults that,
individually or in the aggregate, would not have a
Material Adverse Effect.
In rendering such opinion, such counsel may
state that they are relying upon the certificate of Harris
Trust and Savings Bank, the transfer agent for the Common
Stock, as to the number of shares of Common Stock at any time
or times outstanding, and that insofar as their opinion under
clause (7) above relates to the accuracy and completeness of
the Prospectus and Registration Statement, it is based upon a
general review with the Company's representatives and
independent accountants of the information contained therein,
without independent verification by such counsel of the
accuracy or completeness of such information. Such counsel
may also rely upon the opinions of competent local counsel
satisfactory to counsel to the Underwriters as to legal
matters in jurisdictions other than those in which they are
domiciled and, as to factual matters, on certificates of
Cypress and of officers of the Company and of state or
province officials, in which case their opinion is to state
that they are so doing and copies of such opinions or
certificates are to be attached to the opinion unless such
opinions or certificates (or, in the case of certificates, the
information therein) have been furnished to the
Representatives in other form.
(ii) Such opinion or opinions of Sonnenschein Nath &
Rosenthal, counsel for the Underwriters, dated the First
Closing Date or the Second Closing Date, as the case may be,
with respect to the incorporation of the Company, the validity
of the Shares to be sold by the Company, the Registration
Statement and the Prospectus and other related matters as you
may reasonably require, and the Company shall have furnished
to such counsel such documents and shall have exhibited to
them such papers and records as they request for the purpose
of enabling them to pass upon such matters.
22
<PAGE> 23
(iii) A certificate of the chief executive officer and
the principal financial officer of the Company, dated the
First Closing Date or the Second Closing Date, as the case may
be, to the effect that:
(1) the representations and warranties of the
Company set forth in Section 2 of this Agreement are
true and correct as of the date of this Agreement and
as of the First Closing Date or the Second Closing
Date, as the case may be, and the Company has complied
with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at
or prior to such Closing Date; and
(2) the Commission has not issued an order
preventing or suspending the use of the Prospectus or
any preliminary prospectus filed as a part of the
Registration Statement or any amendment thereto; no
stop order suspending the effectiveness of the
Registration Statement has been issued; and to the best
knowledge of the respective signers, no proceedings for
that purpose have been instituted or are pending or
contemplated under the 1933 Act.
The delivery of the certificate provided for in
this subparagraph shall be and constitute a representation and
warranty of the Company as to the facts required in the
immediately foregoing clauses (1) and (2) of this subparagraph
to be set forth in such certificate.
(iv) A certificate of Cypress dated the First Closing
Date or the Second Closing Date, as the case may be, to the
effect that the representations and warranties of Cypress set
forth in Section 3 of this Agreement are true and correct as
of such date and Cypress has complied with all the agreements
and satisfied all the conditions on the part of Cypress to be
performed or satisfied at or prior to such date.
(v) At the time the Pricing Agreement is executed and
also on the First Closing Date or the Second Closing Date, as
the case may be, there shall be delivered to you a letter
addressed to you, as Representatives of the Underwriters, from
Deloitte & Touche LLP, independent accountants, the first one
to be dated the date of the Pricing Agreement, the second one
to be dated the First Closing Date and the third one (in the
event of a second closing) to be dated the Second Closing
Date, to the effect set forth in Schedule B. There shall not
have been any change or decrease specified in the letters
referred to in this subparagraph which makes it impractical or
inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase of the Shares as
contemplated hereby.
(vi) At the time the Pricing Agreement is executed and
also on the First Closing Date or the Second Closing Date, as
the case may be, there
23
<PAGE> 24
shall be delivered to you a letter addressed to you, as
Representatives of the Underwriters, from Price Waterhouse,
independent accountants, the first one to be dated the date of
the Pricing Agreement, the second one to be dated the First
Closing Date and the third one (in the event of a second
closing) to be dated the Second Closing Date, to the effect
set forth in Schedule C. There shall not have been any change
or decrease specified in the letters referred to in this
subparagraph which makes it impractical or inadvisable in the
judgment of the Representatives to proceed with the public
offering or purchase of the Shares as contemplated hereby.
(vii) At or before the time the Pricing Agreement is
executed, there shall be delivered to you a letter
substantially in the form of Exhibit B hereto from Cypress,
each of the Company's officers and directors, each former
stockholder of an Acquired Company to whom shares of Common
Stock are being issued in connection with the Acquisitions and
each person or entity who beneficially owns 1% or more of the
Common Stock outstanding immediately prior to the consummation
of the proposed offering of Shares in which each such person
agrees not to offer, sell, contract to sell or otherwise
dispose of any Common Stock or any securities exercisable for
or convertible into Common Stock for a period of 180 days
after the ate of such letter without the prior written consent
of William Blair & Company, L.L.C.
(viii) Such further certificates and documents as you
may reasonably request.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Sonnenschein Nath & Rosenthal, counsel for the Underwriters, which approval
shall not be unreasonably withheld. The Company shall furnish you with such
manually signed or conformed copies of such opinions, certificates, letters and
documents as you request.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification to the Company and
Cypress without liability on the part of any Underwriter or the Company or
Cypress, except for the expenses to be paid or reimbursed by the Company
pursuant to Sections 7 and 9 hereof and except to the extent provided in
Section 11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. If the sale to
the Underwriters of the Shares on the First Closing Date is not consummated
because any condition of the Underwriters' obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company or Cypress to perform any agreement herein or to comply with any
provision hereof, unless such failure to satisfy such condition or to comply
with any provision hereof is due to the default or omission of any Underwriter,
the Company agrees to reimburse you and the other Underwriters upon demand for
all
24
<PAGE> 25
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been reasonably incurred by you and them in connection with the
proposed purchase and sale of the Shares. Any such termination shall be
without liability of any party to any other party except that the provisions of
this Section, Section 7 and Section 11 shall at all times be effective and
shall apply.
SECTION 10. Effectiveness of Registration Statement. You, the Company
and Cypress will use your and its best efforts to cause the Registration
Statement to become effective, if it has not yet become effective, and to
prevent the issuance of any stop order suspending the effectiveness of the
Registration Statement and, if such stop order be issued, to obtain as soon as
possible the lifting thereof.
SECTION 11. Indemnification. (a) The Company and Cypress, jointly
and severally, agree to indemnify and hold harmless (i) each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the
1933 Act or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject under the 1933 Act, the Exchange Act or other
foreign, federal or state statutory law or regulation, at common law or
otherwise (including in settlement of any litigation if such settlement is
effected with the written consent of the Company and/or Cypress, as the case
may be), insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
including the information deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A and/or Rule 434, if applicable,
any preliminary prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse each Underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action
and (ii) William Blair & Company, L.L.C. and each person, if any, who controls
William Blair & Company, L.L.C. within the meaning of the 1933 Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become
subject under the 1933 Act, the Exchange Act or other foreign, federal or state
statutory law or regulation, at common law or otherwise (including in
settlement of any litigation if such settlement is effected with the written
consent of the Company and/or Cypress, as the case may be), insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon William Blair & Company, L.L.C.'s participation as a
"qualified independent underwriter" in connection with the offering of Shares
pursuant to Schedule E to the By-laws of the NASD, provided, however, that
neither the Company nor Cypress will be liable in any such case to the extent
that (x) any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to
25
<PAGE> 26
the Company by or on behalf of any Underwriter through the Representatives,
specifically for use therein; or (y) if such statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
and (1) any such loss, claim, damage or liability suffered or incurred by any
Underwriter (or any person who controls any Underwriter) resulted from an
action, claim or suit by any person who purchased Shares which are the subject
thereof from such Underwriter in the offering and (2) such Underwriter failed
to deliver or provide a copy of the Prospectus to such person at or prior to
the confirmation of the sale of such Shares in any case where such delivery is
required by the 1933 Act. In addition to their other obligations under this
Section 11(a), the Company and Cypress agree that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, or any participation as a "qualified independent
underwriter, described in this Section 11(a), they will reimburse the
Underwriters (and/or William Blair & Company, L.L.C. in its capacity as a
"qualified independent underwriter," as applicable) on a monthly basis for all
reasonable legal and other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Company's and Cypress' obligation to
reimburse the Underwriters (and/or William Blair & Company, L.L.C. in its
capacity as a "qualified independent underwriter," as applicable) for such
expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. This indemnity agreement
will be in addition to any liability which the Company and Cypress may
otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the 1933 Act or the Exchange Act, against any losses,
claims, damages or liabilities to which the Company, or any such director,
officer or controlling person may become subject under the 1933 Act, the
Exchange Act or other foreign, federal or state statutory law or regulation, at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any preliminary prospectus,
the Prospectus, or any amendment or supplement thereto in reliance upon and in
conformity with Section 4 of this Agreement or any other written information
furnished to the Company by such Underwriter through the Representatives
specifically for use in the preparation thereof; and will reimburse any legal
or other expenses reasonably incurred by the Company, or any such director,
officer or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. In addition to
26
<PAGE> 27
their other obligations under this Section 11(b), the Underwriters agree that,
as an interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this Section
11(b), they will reimburse the Company and Cypress on a monthly basis for all
reasonable legal and other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Underwriters' obligation to reimburse the
Company and Cypress for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, or the indemnified and indemnifying
parties may have conflicting interests which would make it inappropriate for
the same counsel to represent both of them, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defense
and otherwise to participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of
such action and approval by the indemnified party of counsel, the indemnifying
party will not be liable to such indemnified party under this Section for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal defense in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel, approved by the Representatives in
the case of paragraph (a) representing all indemnified parties not having
different or additional defenses or potential conflicting interest among
themselves who are parties to such action), (ii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of commencement of
the action or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any
27
<PAGE> 28
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability arising out of such
proceeding.
(d) If the indemnification provided for in this Section is
unavailable to an indemnified party under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages or liabilities referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, Cypress and the Underwriters from the offering of the Shares or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company, Cypress and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The respective relative
benefits received by the Company, Cypress and the Underwriters shall be deemed
to be in the same proportion in the case of the Company and Cypress, as the
total price paid to the Company for the Shares by the Underwriters (net of
underwriting discount but before deducting expenses), and in the case of the
Underwriters as the underwriting discount received by them bears to the total
of such amounts paid to the Company and received by the Underwriters as
underwriting discount in each case as contemplated by the Prospectus. The
relative fault of the Company and Cypress and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or by Cypress or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, Cypress and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section are several in proportion to their
respective underwriting commitments and not joint.
28
<PAGE> 29
(e) The provisions of this Section shall survive any termination of
this Agreement.
SECTION 12. Default of Underwriters. It shall be a condition to the
agreement and obligation of the Company to sell and deliver the Shares
hereunder, and of each Underwriter to purchase the Shares hereunder, that,
except as hereinafter in this paragraph provided, each of the Underwriters
shall purchase and pay for all Shares agreed to be purchased by such
Underwriter hereunder upon tender to the Representatives of all such Shares in
accordance with the terms hereof. If any Underwriter or Underwriters default
in their obligations to purchase Shares hereunder on the First Closing Date and
the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed 10 percent of the
total number of Shares which the Underwriters are obligated to purchase on the
First Closing Date, the Representatives may make arrangements satisfactory to
the Company for the purchase of such Shares by other persons, including any of
the Underwriters, but if no such arrangements are made by such date the
nondefaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Shares which such defaulting
Underwriters agreed but failed to purchase on such date. If any Underwriter or
Underwriters so default and the aggregate number of Shares with respect to
which such default or defaults occur is more than the above percentage and
arrangements satisfactory to the Representatives and the Company for the
purchase of such Shares by other persons are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of
any nondefaulting Underwriter or the Company or Cypress, except for the
expenses to be paid by the Company pursuant to Section 7 hereof and except to
the extent provided in Section 11 hereof.
In the event that Shares to which a default relates are to be
purchased by the nondefaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected. As used in this Agreement,
the term "Underwriter" includes any person substituted for an Underwriter under
this Section. Nothing herein will relieve a defaulting Underwriter from
liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
immediately as to Sections 7, 9, 11 and 14 and as to all other provisions at
10:00 A.M., Chicago time, on the day following the date upon which the Pricing
Agreement is executed and delivered, unless such a day is a Saturday, Sunday or
holiday (and in that event this Agreement shall become effective at such hour
on the business day next succeeding such Saturday, Sunday or holiday); but this
Agreement shall nevertheless become effective at such earlier time after the
Pricing Agreement is executed and delivered as you may determine on and by
notice to the Company and Cypress or by release of any Shares for sale to the
public. For the purposes of this Section, the Shares shall be deemed to have
been so released upon the release for publication of any newspaper
advertisement relating to the Shares or upon the release by you of telegrams
(i) advising Underwriters that the Shares are released for public offering, or
(ii) offering the Shares for sale to securities dealers, whichever may occur
first.
29
<PAGE> 30
SECTION 14. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice
to you and Cypress or by you by notice to the Company and Cypress at
any time prior to the time this Agreement shall become effective as to
all its provisions, and any such termination shall be without
liability on the part of the Company or Cypress to any Underwriter
(except for the expenses to be paid or reimbursed pursuant to Section
7 hereof and except to the extent provided in Section 11 hereof) or of
any Underwriter to the Company or Cypress.
(b) This Agreement may also be terminated by you prior to the
First Closing Date, and the option referred to in Section 5, if
exercised, may be cancelled at any time prior to the Second Closing
Date, if (i) trading in securities on the New York Stock Exchange
shall have been suspended or minimum prices shall have been
established on such exchange, or (ii) a banking moratorium shall have
been declared by Illinois, New York, or United States authorities, or
(iii) there shall have been any change in financial markets or in
political, economic or financial conditions which, in the opinion of
the Representatives, either renders it impracticable or inadvisable to
proceed with the offering and sale of the Shares on the terms set
forth in the Prospectus or materially and adversely affects the market
for the Shares, or (iv) there shall have been an outbreak of major
armed hostilities between the United States and any foreign power
which in the opinion of the Representatives makes it impractical or
inadvisable to offer or sell the Shares. Any termination pursuant to
this paragraph (b) shall be without liability on the part of any
Underwriter to the Company or Cypress or on the part of the Company to
any Underwriter or Cypress (except for expenses to be paid or
reimbursed pursuant to Section 7 hereof and except to the extent
provided in Section 11 hereof).
SECTION 15. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of Cypress and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
any Underwriter or the Company or any of its or their partners, principals,
members, officers or directors or any controlling person, or Cypress as the
case may be, and will survive delivery of and payment for the Shares sold
hereunder.
SECTION 16. Notices. All communications hereunder will be in writing
and, if sent to the Underwriters will be mailed, delivered, telecopied or
telegraphed and confirmed to you c/o William Blair & Company, L.L.C., 222 West
Adams Street, Chicago, Illinois 60606, Attn: John R. Ettelson, Fax (312)
368-9418, with a copy to Michael M. Froy, Sonnenschein Nath & Rosenthal, 8000
Sears Tower, Chicago, Illinois 60606, Fax (312) 876-7934, if sent to the
Company will be mailed, delivered or telegraphed and confirmed to the Company
at its corporate headquarters with a copy to Bruce H. Hallett, Crouch &
Hallett, L.L.P., 717 N. Harwood, Suite 1400, Dallas, Texas 75201, Fax (214)
953-3154; and if sent
30
<PAGE> 31
to Cypress will be mailed, delivered, telecopied or telegraphed and confirmed
to Cypress Capital Partners I, L.P., One Galleria Tower, Suite 1650, 13355 Noel
Road, Dallas, Texas 75240, with a copy to Bruce H. Hallett, Crouch & Hallett,
L.L.P., 717 N. Harwood, Suite 1400, Dallas, Texas 75201, Fax (214) 953-3154.
SECTION 17. Successors. This Agreement and the Pricing Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors, personal representatives and assigns, and to the benefit
of the officers and directors and controlling persons referred to in Section
11, and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Shares as such from any of
the Underwriters merely by reason of such purchase.
SECTION 18. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with this financing,
and any action under or in respect of this Agreement taken by you will be
binding upon all the Underwriters.
SECTION 19. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
SECTION 20. References. All references herein to the Company's
"subsidiaries" shall mean the Acquired Companies and all of the Company's
direct and indirect subsidiaries.
SECTION 21. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
SECTION 22. Applicable Law. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the State of
Illinois.
[This space intentionally left blank.]
31
<PAGE> 32
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, Cypress and the
several Underwriters including you, all in accordance with its terms.
Very truly yours,
DYNAMEX INC.
By:
-----------------------------------
Chief Executive Officer
CYPRESS CAPITAL PARTNERS I, L.P.
By:
-----------------------------------
General Partner
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
WILLIAM BLAIR & COMPANY, L.L.C.
HOAK SECURITIES CORP.
Acting as Representatives of the
several Underwriters named in
Schedule A.
WILLIAM BLAIR & COMPANY, L.L.C.
By:
-----------------------------
A Principal
32
<PAGE> 33
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Shares to be
Underwriter Purchased
- ----------- ---------------
<S> <C>
William Blair & Company, L.L.C. . . . . . . . . . . . . . . . . .
Hoak Securities Corp. . . . . . . . . . . . . . . . . . . . . . . .
--------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
==============
</TABLE>
<PAGE> 34
SCHEDULE B
Comfort Letter for Dynamex Inc.
To Be Delivered by Deloitte & Touche LLP/Deloitte & Touche
(1) They are independent public accountants with respect to the
Company and its subsidiaries within the meaning of the 1933 Act.
(2) In their opinion the financial statements and schedules of the
Company and its subsidiaries (including the Acquired Companies) included in the
Registration Statement and the financial statements of the Company from which
the information presented under the captions "Summary Consolidated Financial
Data" and "Selected Consolidated Financial Data" has been derived, which are
stated therein to have been examined by them comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act.
(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to April 30,
1996, a reading of minutes of meetings of the stockholders and directors of the
Company and its subsidiaries since April 30, 1996, a reading of the latest
available interim unaudited financial statements of the Company and its
subsidiaries (with an indication of the date thereof) and other procedures as
specified in such letter, nothing came to their attention which caused them to
believe that (i) the unaudited financial statements of the Company and its
subsidiaries included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the 1933
Act or that such unaudited financial statements are not fairly presented in
accordance with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
in the Registration Statement, (ii) the amounts in "Summary Financial Data" and
"Selected Financial Data" included in the Prospectus do not agree with or are
not derivable from the corresponding amounts in the audited consolidated
financial statements or unaudited consolidated financial statements (as
applicable) from which such amounts were derived, and (iii) at a specified date
not more than five days prior to the date thereof in the case of the first
letter and not more than two business days prior to the date thereof in the
case of the second and third letters, there was any change in the capital stock
or long-term debt or short-term debt (other than normal payments) of the
Company and its subsidiaries or any decrease in net current assets or
stockholders' equity as compared with amounts shown on the latest unaudited
balance sheet of the Company included in the Registration Statement or for the
period from the date of such balance sheet to a date not more than five days
prior to the date thereof in the case of the first letter and not more than two
business days prior to the date thereof in the case of the second and third
letters, there were any decreases, as compared with the corresponding period of
the prior year, in net sales, income before income taxes or in the total or per
share
<PAGE> 35
amounts of net income except, in all instances, for changes or decreases which
the Prospectus discloses have occurred or may occur or which are set forth in
such letter.
(4) On the basis of reading the pro forma information included in the
Prospectus, carrying out specified procedures, inquiries of certain officials
of the Company who have responsibility for financial and accounting matters,
and proving the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts, nothing came to their attention which
caused them to believe that the pro forma financial information does not comply
in all material respects with the applicable accounting requirements of Rule
11-02 of Regulation S-X and the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such information.
(5) They have carried out specified procedures, which have been
agreed to by the Representatives, with respect to certain information in the
Prospectus specified by the Representatives, and on the basis of such
procedures, they have found such information to be in agreement with the
general accounting records of the Company and its subsidiaries.
<PAGE> 36
SCHEDULE C
Comfort Letter of Price Waterhouse
(1) They are independent public accountants with respect to Dynamex
Express Inc. within the meaning of the 1933 Act.
(2) In their opinion the financial statements of Dynamex Express Inc.
included in the Registration Statement which are stated therein to have been
examined by them comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act.
(3) They have carried out specified procedures, which have been
agreed to by the Representatives, with respect to certain information in the
Prospectus specified by the Representatives, and on the basis of such
procedures, they have found such information to be in agreement with the
general accounting records of Dynamex Express Inc. and its subsidiaries.
<PAGE> 37
EXHIBIT A
DYNAMEX INC.
3,100,000 Shares Common Stock(1)
PRICING AGREEMENT
______________________, 1996
William Blair & Company, L.L.C.
Hoak Securities Corp.
As Representatives of the Several
Underwriters
c/o William Blair & Company
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated ____________, 1996 (the
"Underwriting Agreement") relating to the sale by the Company and the Selling
Stockholders and the purchase by the several Underwriters for whom William
Blair & Company, L.L.C. and Hoak Securities Corp. are acting as representatives
(the "Representatives"), of the above Shares. All terms herein shall have the
definitions contained in the Underwriting Agreement except as otherwise defined
herein.
Pursuant to Section 5 of the Underwriting Agreement, the Company and each of
the Selling Stockholders agree with the Representatives as follows:
1. The initial public offering price per share for the Shares shall be
$__________.
- ---------------
(1) Plus an option to acquire up to 465,000 additional shares to
cover overallotments.
<PAGE> 38
2. The purchase price per share for the Shares to be paid by the
several Underwriters shall be $_________, being an amount equal to the initial
public offering price set forth above less $________ per share.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, Cypress and the
several Underwriters, including you, all in accordance with its terms. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall be considered one and the
same agreement.
Very truly yours,
DYNAMEX INC.
By:
-----------------------------------
Chief Executive Officer
CYPRESS CAPITAL PARTNERS I, L.P.
By:
-----------------------------------
General Partner
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
WILLIAM BLAIR & COMPANY, L.L.C.
HOAK SECURITIES CORP.
Acting as Representatives of the
several Underwriters named in
Schedule A.
WILLIAM BLAIR & COMPANY, L.L.C.
By:
-----------------------------
A Principal
<PAGE> 39
EXHIBIT B
[Letterhead of the persons identified in Section 8(f)(vi)]
___________________, 1996
William Blair & Company, L.L.C.
Hoak Securities Corp.
As Representatives of the Several
Underwriters
c/o William Blair & Company
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") among Dynamex Inc., a
Delaware corporation (the "Company"), each of the Selling Stockholders named
therein and each of you as representatives of a group of Underwriters named
therein, relating to an underwritten public offering of Common Stock, no par
value (the "Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned agrees not to offer, sell, contract to
sell or otherwise dispose of any Common Stock or securities exercisable for or
convertible into Common Stock for a period of 180 days after the date hereof
without the prior written consent of William Blair & Company, L.L.C.
If for any reason the Underwriting Agreement shall be terminated prior to
the First Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.
Very truly yours,
[Signature]
[Name and address of the persons
identified in Section 8(f)(vi)]
<PAGE> 1
EXHIBIT 2.1
DYNAMEX INC.
PURCHASE OF SHARES
OF
ACTION DELIVERY AND MESSENGER SERVICE (1996) LIMITED
FROM
NATURALLY NOVA SCOTIA HEALTH PRODUCTS LIMITED
AND
DAVID NANTAU
- --------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
SMITH LYONS
<PAGE> 2
I N D E X
---------
Page
PARTIES 1
RECITALS 2
ARTICLE ONE - DEFINITIONS
Section 1.01 Definitions 3
Section 1.02 Schedules 5
ARTICLE TWO - PURCHASE AND SALE OF SHARES
Section 2.01 Agreement to Purchase 6
Section 2.02 Investigation 6
Section 2.03 Documents and Data 7
Section 2.04 Announcements 7
ARTICLE THREE - PURCHASE PRICE
Section 3.01 Amount of Purchase Price 7
Section 3.02 Payment of Purchase Price 7
Section 3.03 Purchase Price Adjustment 7
Section 3.04 Discharge of Bank Indebtedness 8
ARTICLE FOUR - CLOSING ARRANGEMENTS
Section 4.01 Closing 8
Section 4.02 Closing Procedures 9
Section 4.03 Termination of Agreement 10
ARTICLE FIVE - CONDITIONS OF CLOSING
Section 5.01 Conditions for the Purchaser's Benefit 10
Section 5.02 Conditions for the Vendors' Benefit 13
ARTICLE SIX - REPRESENTATIONS, WARRANTIES AND INDEMNITIES
Section 6.01 Representations and Warranties of the Vendors 14
Section 6.02 Representations and Warranties of the Purchaser 23
Section 6.03 Indemnification 24
Section 6.04 Non-Merger 25
<PAGE> 3
Page
----
ARTICLE SEVEN - DYNAMEX OFFERING
Section 7.01 Management Co-operation 26
Section 7.02 Material Change 26
ARTICLE EIGHT - ADDITIONAL COVENANTS OF THE PARTIES
Section 8.01 Continuity of Senior Personnel 26
Section 8.02 Continuity of Customers and Suppliers 26
Section 8.03 Interim Period 26
Section 8.04 Discharge of Royal Bank Guarantees 26
Section 8.05 Escrow Arrangements 27
ARTICLE NINE - GENERAL
Section 9.01 Interpretation 27
Section 9.02 Further Assurances 28
Section 9.03 Entire Agreement 28
Section 9.04 Invalidity of Provisions 28
Section 9.05 Applicable Law 28
Section 9.06 Notices 28
Section 9.07 Successors and Assigns 29
Section 9.08 Assignment by Dynamex 29
Section 9.09 Remedies Cumulative 29
Section 9.10 Counterparts 30
EXECUTION 30
2.
<PAGE> 4
THIS AGREEMENT made as of the 20th day of June, 1996.
B E T W E E N:
NANCY SMITHERS, of the Halifax Regional
Municipality, Province of Nova Scotia
(hereinafter referred to as "Smithers")
OF THE FIRST PART
- and -
DAVID NANTAU, of the Halifax Regional
Municipality, Province of Nova Scotia
(hereinafter referred to as "Nantau")
OF THE SECOND PART
- and -
NATURALLY NOVA SCOTIA HEALTH PRODUCTS
LIMITED, a corporation incorporated
under the laws of Nova Scotia
(hereinafter referred to as "Naturally")
OF THE THIRD PART
- and -
2306080 NOVA SCOTIA LIMITED, a corporation
incorporated under the laws of Nova Scotia
(hereinafter referred to as "Action 1996")
OF THE FOURTH PART
<PAGE> 5
2.
- and -
DYNAMEX INC., a corporation incorporated
under the laws of the State of Delaware
(hereinafter referred to as the "Purchaser")
OF THE FIFTH PART
- and -
ACTION DELIVERY AND MESSENGER SERVICE
LIMITED, a corporation incorporated under
the laws of Nova Scotia
(hereinafter referred to as "Action")
OF THE SIXTH PART
WHEREAS Action 1996 owns all of the issued and outstanding
common shares of Action;
AND WHEREAS Smithers and Nantau are the registered and
beneficial owners of all of the issued and outstanding shares of Action 1996;
AND WHEREAS Smithers proposes to transfer all of her issued
and outstanding shares of Action 1996 to Naturally, so that Naturally and
Nantau shall own all of the issued and outstanding shares of Action 1996;
AND WHEREAS Action will be wound up into Action 1996, and
Action shall thereafter make an application to surrender its Certificate of
Incorporation;
AND WHEREAS prior to the consummation of the transactions
contemplated by this Agreement the real property owned by Action 1996, after
the wind-up of Action, shall be transferred by a dividend in specie to
Naturally;
AND WHEREAS upon completion of these transactions Nantau and
Naturally wish to sell and the Purchaser wishes to purchase all of the issued
and outstanding shares of Action 1996;
<PAGE> 6
3.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration
of the premises and the covenants and agreements herein contained, the parties
hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions: In this Agreement, the recitals and the Schedules
and in any amendments hereto, unless the context otherwise requires or unless
otherwise defined in any such Schedule or amendment, the following words and
phrases shall have the meanings set forth after them:
(a) "Action Financial Statements" means the financial statements
of Action for each of the two consecutive twelve-month periods
ended on December 31st, 1995, prepared at the expense of the
Purchaser and in accordance with generally accepted accounting
principles applied on a consistent basis, consisting of a
balance sheet as at such date, and statements of earnings and
retained earnings and of changes in financial position for
such period, together with notes thereto as at such date
including therein full particulars of all contingent
liabilities considered material and the report of the Auditors
thereon;
(b) "Action" means Action Delivery and Messenger Service Limited;
(c) "Action 1996" means 2306080 Nova Scotia Limited (which will
change its name to Action Delivery and Messenger Service
(1996) Limited);
(d) "Action Real Property" means the premises known municipally as
90 Simmonds Drive, Dartmouth, Nova Scotia B3B 1P6;
(e) "Affiliate" and "Associate" have the meanings ascribed thereto
in The Companies Act (Nova Scotia);
(f) "Agreement" means this agreement and all Schedules and all
instruments supplemental hereto or in amendment or
confirmation hereof, and "hereof", "hereto", "hereunder" and
similar expressions, mean and refer to this Agreement as a
whole and not to any particular Article or section or
subsection, and "Article" or "section" or "subsection" or
"paragraph" mean and refer to the specified Article or section
or subsection or paragraph of this Agreement;
(g) "Assets" means the undertaking and all property, assets and
rights of Action of every kind and description and wheresoever
situated, including without limitation, all goodwill,
know-how, Intellectual Property, customer lists, supplier
lists, all machinery, equipment, furnishings, and the Leased
Property;
<PAGE> 7
4.
(h) "Auditors" means Deloitte & Touche, Halifax, Nova Scotia;
(i) "Business" means the business of ground courier messenger
services carried on by Action;
(j) "Business Day" means any day other than Saturday, Sunday and
statutory holidays in the Province of Ontario or the Province
of Nova Scotia;
(k) "Claims" has the meaning ascribed thereto in section 6.3
hereof;
(l) "Closing" means the closing of the purchase and sale of the
Shares as contemplated hereunder;
(m) "Closing Date" means June 28th, 1996 or such other date as may
be agreed to in writing by the parties hereto.
(n) "Contract" means any agreement, obligation, license, joint
venture agreement, contract, understanding, commitment,
engagement, indenture or instrument to which either Action is
a party or by which Action is bound, whether written or oral,
including, without limitation, all uncompleted orders from
customers;
(o) "Dynamex Note" means the promissory note addressed to the
Vendors in the principal amount of $150,000, securing the
balance of the Purchase Price and maturing on July 31st, 1996,
in the form of the Note annexed hereto as Schedule "Q";
(p) "Employees" means the employees of Action employed on the date
of this Agreement or, as the case may be, on the Closing Date
including those on pregnancy or sick leave, temporary lay-off
or short term or long term disability;
(q) "Final Payment Date" means the date on which all accrued
principal and interest under the Dynamex Note is to be paid in
full, being July 31st, 1996.
(r) "Intellectual Property" means patents, patent applications,
inventions, designs, registered designs, applications to
register designs, registered and unregistered copyright and
applications to register copyright, trade secrets,
confidential information, know-how, trade names, registered
and unregistered trade marks and applications to register
trade marks, personality rights, goodwill and other
proprietary rights, throughout the world;
(s) "Interim Period" means the period commencing on January 1,
1996 and terminating on the Closing Date;
(t) "Leased Property" means all equipment leased by Action and
used to carry on the Business including, without limitation,
the Leased Property listed in Schedule "I" hereto;
<PAGE> 8
5.
(u) "Nantau" means David Nantau, a senior officer of Action;
(v) "Naturally" means Naturally Nova Scotia Health Products
Limited;
(w) "Person" means an individual, corporation, partnership, trust,
trustee or any unincorporated organization, and words
importing persons have a similar meaning;
(x) "Purchase Price" means the aggregate purchase price set forth
in Section 3.01;
(y) "Purchaser's Counsel" means Smith Lyons of Toronto, Ontario;
(z) "Schedules" means the schedules attached to and forming part
of this Agreement;
(aa) "Shares" means 100 common shares and 125 preference shares,
with a redemption price of $1,000, in the capital of Action
1996;
(ab) "Subsidiary" means any subsidiary within the meaning of The
Companies Act (Nova Scotia); and Subsidiaries means all of the
foregoing;
(ac) "Taxes" means any taxes, levies, imposts, duties, or
governmental fees including, without limitation, income,
capital, transfer, business, property, excise, sales and use
taxes and any interest or penalties thereon or in respect
thereof;
(ad) "Vendors" means collectively Nantau and Naturally;
(ae) "Vendors' Counsel" means Boyne Clarke of Dartmouth, Nova
Scotia;
(af) "Vendors' Counsel's Closing Opinion" means an opinion of
Vendors' Counsel addressed to the Purchaser and in form
reasonably satisfactory to Purchaser's Counsel; and
(bb) "Working Capital" means current assets less current
liabilities determined in accordance with generally accepted
accounting principles, except that, for the purpose of Section
3.03, Working Capital will contain adjustments as indicated on
Schedule P so as to be determined in a manner consistent with
the calculation of Working Capital on Schedule P.
Section 1.02 Schedules: The following are the Schedules attached to and
forming part of this Agreement:
Schedule A1, A2 - Non-Competition Agreements
Schedule B - Nantau Employment Agreement
Schedule C - Capital Structure
Schedule D - Shareholders Agreements
Schedule E - Non-Arm's Length Agreements
<PAGE> 9
Schedule F - Material Contracts
Schedule G - Consents
Schedule H - Encumbrances
Schedule I - Real Property/Equipment Leases
Schedule J - Litigation
Schedule K - Employment Matters
Schedule L - Trade marks
Schedule M - Licences and Permits
Schedule N - Guarantees
Schedule O - Bank Accounts
Schedule P Working Capital Calculation
Schedule Q - Form of Dynamex Note
ARTICLE TWO
PURCHASE AND SALE OF SHARES
Section 2.01 Agreement to Purchase: Subject to the terms and conditions of
this Agreement and in reliance on the representations and warranties contained
herein the Vendors shall sell and the Purchaser shall purchase the Shares on
the Closing Date.
Section 2.02 Investigation:
(a) Until the Closing Date, the Purchaser and its solicitors,
accountants, appraisers and other advisers shall during
business hours have reasonable access to the premises, books,
and other records and data of Action and Action 1996;
(b) Until the Closing Date, there shall be made available to the
Purchaser such documents and data whether in hard copy or
machine readable form as the Purchaser may reasonably request
relating to the Business and the Assets;
(c) The Purchaser shall hold and shall cause to be held in
confidence all information obtained from Action, Action 1996
and the Vendors both before and after the date hereof in
connection with the transactions contemplated by this
Agreement; and if for any reason the parties hereto do not
complete the transaction contemplated by this Agreement, the
Purchaser shall forthwith return to the Vendors all copies of
any information, documents and data delivered in connection
with the transactions contemplated by this Agreement, continue
to hold such information in confidence and refrain from using
such information to its advantage.
(d) The obligation of the Purchaser contained in paragraph (c)
above shall not apply to information provided by the Purchaser
to regulatory authorities, information which is in the public
domain, information which is otherwise known to the Purchaser,
information which is disclosed to the Purchaser by a Person
who did not come into possession of the information by
improper or unlawful means or
<PAGE> 10
7.
information the disclosure of which is required by law or a
court of competent jurisdiction.
Section 2.03 Documents and Data: On the Closing Date, the Vendors and
Smithers shall deliver to the Purchaser at the offices of Action 1996 all
documents, or copies thereof, and other data, technical or otherwise, owned by
Action, Action 1996 and the Vendors that relate to the Business or Action and
which are in the possession of such parties or their solicitors, accountants,
appraisers and other advisers. Originals of all articles of incorporation or
amalgamation or similar documents, by-laws and resolutions of directors,
executive or other committees of directors or shareholders, minutes or other
records of meetings of directors, executive or other committees of directors or
shareholders and share ledgers, registers or similar documents and corporate
seals shall be delivered to the Purchaser on the Closing Date. The Vendors and
Smithers shall not retain any such documents or other records or copies thereof
whether in hard copy or machine readable form.
Section 2.04 Announcements: All public announcements about the transactions
provided for herein or contemplated hereby, or about the termination of this
Agreement prior to the Closing Date for any reason, shall be approved as to
form, content and timing by the Vendors and the Purchaser.
ARTICLE THREE
PURCHASE PRICE
Section 3.01 Amount of Purchase Price: The aggregate purchase price
payable by the Purchaser for the Shares (the "Purchase Price") shall be the sum
of Two Hundred Thousand Dollars ($200,000.00), to be allocated among the
Vendors in a manner as directed by them in writing at the Closing.
Section 3.02 Payment of Purchase Price: The Purchaser shall pay and
satisfy the Purchase Price by:
(i) the payment on the Closing Date of the sum of $50,000.00
payable in trust to Vendors' Counsel for the benefit of the
Vendors by way of certified cheque, bank draft or wire
transfer; and
(ii) the issuance to the Vendors of the Dynamex Note on the Closing
Date; and
(iii) payment on the Final Payment Date of all principal and accrued
interest under the Dynamex Note.
Section 3.03 Purchase Price Adjustment: To the extent that the Working
Capital of Action as at the Closing Date, or such other month-end closest to
the Closing Date as shall be mutually agreed to by the Purchaser and the
Vendors is either more or less than the Working Capital as set forth on
Schedule P, the Purchase Price referred to in Section 3.02 above shall be
either
<PAGE> 11
8.
increased or reduced by the amount of such surplus or deficiency. Unless
otherwise agreed to by the Purchaser and the Vendors, the determination of such
surplus or deficiency shall be made by the Auditors. If the Vendors disagree
with the initial determination of the Auditors, within the thirty-day period
after the delivery of such initial determination to the Vendors the Auditors
shall meet with the Vendors and their professional advisors to produce a
determination of Working Capital of Action as at the Closing Date which is
acceptable to all of the parties hereto. If at the end of such thirty-day
period an agreed-upon determination has not been reached, the matter shall be
referred to arbitration pursuant to the Arbitration Act of Nova Scotia, and the
Vendors and the Purchaser shall share equally in the costs and expenses
relating to such arbitration.
If the existence of such surplus or deficiency cannot be
determined as at the Closing Date, the Auditors shall have thirty days from the
Closing Date to determine whether or not such surplus or deficiency exists, and
shall provide written notice to all of the parties hereto of their
determination of such surplus or deficiency. The provisions above relating to
a thirty-day consultation period, to reach an agreed-upon determination, shall
apply; and if no such agreed-upon determination is reached the matter shall be
referred to arbitration as set forth in the previous paragraph. Upon final
determination of such surplus or deficiency, whether pursuant to the provisions
of this Section 3.03 or pursuant to arbitration, the Purchaser shall forthwith
pay the amount of such surplus to the Vendors on a proportionate basis or
alternatively, the Vendors shall forthwith reimburse to the Purchaser the
amount of such deficiency on a proportionate basis.
If the final determination of such surplus or deficiency of
Working Capital of Action is completed prior to the Final Payment Date, and
such determination requires the Vendors to reimburse to the Purchaser a
deficiency on a proportionate basis, the Purchaser shall be entitled to deduct
the deficiency on a proportionate basis from the amounts due and payable to
discharge the Dynamex Note on the Final Payment Date.
Section 3.04 Discharge of Bank Indebtedness: Immediately upon completion of
the Closing, the Purchaser shall cause Action 1996 to continue responsibility
for the balance of the then outstanding term loan in Action 1996 granted by The
Royal Bank of Canada, with a current approximate balance outstanding of
$285,000; the outstanding computer loan with the Royal Bank of Canada, with a
current balance of approximately $61,589.81; and the operating line of credit
with The Royal Bank of Canada; provided, however, that the Purchaser shall not
be required to cause Action 1996 to assume responsibility for any balance
outstanding under the said operating line of credit exceeding the sum of
$400,000 at Closing.
ARTICLE FOUR
CLOSING ARRANGEMENTS
Section 4.01 Closing: The closing of the transactions contemplated hereby
shall take place on the Closing Date at the offices of the Vendors' Counsel,
Gregory R. Baker, Esq., Boyne Clarke,
<PAGE> 12
9.
Suite 700, Belmont House, Box 876, 33 Alderney Drive, Dartmouth, Nova Scotia,
B2Y 3Z5, or at such other place or time as may be approved by the Vendors and
the Purchaser.
Section 4.02 Closing Procedures: At or before the Closing on the Closing
Date, the parties shall take or cause to be taken all actions, steps and
corporate proceedings necessary or desirable to validly and effectively approve
or authorize the completion of the transactions contemplated hereby. Upon
fulfilment of all the conditions set out in Section 5.01 that have not been
waived in writing as therein provided, the Vendors shall deliver to the
Purchaser:
(a) certificates representing the Shares duly endorsed in blank
for transfer to be held in escrow pursuant to Section 8.05
hereof;
(b) the releases and resignations referred to in Section 5.01(f);
(c) the non-competition agreements referred to in Section 5.01(g);
(d) the consents referred to in Section 5.01(i);
(e) the Nantau employment contract provided for in Section 5.01(k)
executed by Nantau;
(f) Vendors' Counsel's Closing Opinion, confirming the matters set
forth in Section 6.01(a) and (b), and such other matters as
may be reasonably requested by Purchaser's Counsel, in a form
reasonably satisfactory to Purchaser's Counsel; and
(g) all other assurances, transfers, assignments, consents,
certificates and all such other documents Purchaser's Counsel
considers reasonably necessary or desirable to validly and
effectively complete the consummation of the transactions
contemplated hereby.
Upon fulfilment of all the conditions set out in Section 5.02 that have not
been waived in writing as therein provided, the Purchaser shall deliver to the
Vendors;
(a) the payments contemplated by Section 3.02;
(b) the Dynamex Note;
(c) the Nantau employment contract provided for in Section
5.01(k), executed by Action 1996;
(d) Purchaser's Counsel's Closing Opinion confirming the matters
set forth in Section 6.02 (a) and (b), and such other matters
as may be reasonably requested by Vendors' Counsel, in a form
reasonably satisfactory to Vendors' Counsel; and
<PAGE> 13
10.
(e) all other assurances, transfers, assignments, consents,
certificates and all such other documents Vendors' Counsel
considers reasonably necessary or desirable to validly and
effectively complete the consummation of the transactions
contemplated hereby.
Section 4.03 Termination of Agreement: Notwithstanding any other provision
of this Agreement:
(a) if the Closing shall not have taken place on or before June
30, 1996, then at the sole discretion of the Vendors and
Smithers and upon notice to the Purchaser the Vendors and
Smithers may terminate this Agreement and all of the
obligations of the parties arising thereunder, other than the
obligation of the Purchaser pertaining to the confidentiality
of information provided to it or on its behalf, pursuant to
Section 2.02 hereof; or
(b) if at any time prior to June 30, 1996 the Purchaser acting
reasonably shall determine that one or more of the conditions
for its benefit set forth in Section 5.01 hereof shall not be
satisfied, then at the sole discretion of the Purchaser and
upon written notice to the Vendors and Smithers the Purchaser
may terminate this Agreement immediately and all of the
obligations of the parties arising therefrom, other than the
obligation of the Purchaser pertaining to the confidentiality
of information provided to it or on its behalf, pursuant to
Section 2.02 hereof.
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01 Conditions for the Purchaser's Benefit: The Purchaser is not
obliged to complete the transaction contemplated hereby unless, on the Closing
Date, each of the following conditions has been satisfied, it being understood
that these conditions are included for the exclusive benefit of the Purchaser
and may be waived in writing in whole or in part by the Purchaser at any time:
(a) Approvals: All necessary legal and corporate proceedings and
approvals, regulatory or otherwise, applicable to the
Business, Action, Action 1996 and the Vendors, shall have been
taken or obtained to permit the parties to complete the
transactions provided for herein.
(b) Representations and Warranties: The representations and
warranties of the Vendors and Smithers set forth in this
Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of such date,
and the Purchaser shall have received a certificate of the
Vendors and Smithers dated as of the Closing Date, confirming
that such representations and warranties
<PAGE> 14
11.
are true and correct as at the Closing Date with the same
force and effect as if made on and as of such date.
(c) Compliance: All of the terms, covenants and agreements set
forth in this Agreement to be complied with or performed by
the Vendors, Action and Smithers on or before the Closing Date
shall have been complied with or performed by the Vendors,
Action and Smithers, as the case may be, in all respects on or
before the Closing Date.
(d) No Change: Except as disclosed or provided for in this
Agreement and the Schedules hereto, and except for the
transactions contemplated in the Recitals to this Agreement,
since December 31st, 1995:
(i) no material adverse change, financial or otherwise,
in the condition of Action, the Business or the
Assets shall have occurred;
(ii) Action shall have operated the Business consistently
with prior practices and shall not have made any
material change to the Business from December 31st,
1995 to the Closing Date; and
(iii) Action shall not have declared or paid a dividend
since December 31st, 1995 or made any other
distribution to its shareholders in respect of their
shares or effected any direct or indirect reduction
of capital, redemption, purchase or other acquisition
by them of any of their issued shares.
(e) Certificate of No Change: The Purchaser shall have received a
certificate of the Vendors and Smithers dated as of the
Closing Date that since December 31st, 1995 there has been no
material adverse change, financial or otherwise, in the
condition of Action, the Business or the Assets, except as
disclosed in this Agreement or in the Schedules hereto.
(f) Directors and Officers: At or before Closing, the directors
and senior officers of Action and Action 1996 shall have
delivered to Action, Action 1996 and the Purchaser their
personal releases of all or any contracts with or claims
against Action and Action 1996 existing up until the Closing
Date; and such directors and senior officers of Action 1996 as
designated in writing by the Purchaser shall have delivered
signed written resignations of their respective positions.
(g) Non-Competition Agreements: Smithers and Nantau shall have
delivered to the Purchaser non-competition agreements in the
form of the agreements attached hereto as Schedules A1 and A2.
(h) Vendors' Counsel's Closing Opinion: The Purchaser shall have
received the Vendors' Counsel's Closing Opinion in form
reasonably satisfactory to Purchaser's Counsel.
<PAGE> 15
12.
(i) Consents: Action 1996 shall have received the consents
referred to in Schedule G to the change of ownership of Action
1996, including without limitation the consent of The Royal
Bank of Canada to the continuation of the existing Action 1996
indebtedness with the said Bank as at the Closing Date, as
contemplated by Section 3.04;
(i) NationsBank Consent: The Purchaser shall have received the
consent of its banker, NationsBank of Texas, N.A.
(j) Employment Contracts: Nantau shall have entered into an
employment contract with the Purchaser in the form of the
employment contract annexed hereto as Schedule B.
(k) Action Real Property: Ownership of the Action Real Property
together with all related indebtedness on the accounts of
Action 1996 shall have been transferred to Naturally for the
amount of the mortgage outstanding in favour of The Royal Bank
of Canada on such property prior to the Closing Date.
(l) Lease: On or before Closing the Purchaser and Naturally shall
have executed a ten-year triple net lease for the Action Real
Property, at a monthly rent of $5,500.00 (triple net).
(m) Indebtedness to Affiliates: On or before Closing Action 1996
shall have discharged all indebtedness to any of its
Affiliates and Associates, and all Affiliates and Associates
of Action 1996 shall have discharged all of their respective
indebtedness to Action 1996.
(n) Vehicle Financing Loans: On or before Closing any term bank
loans regarding driver vehicle financing to which Action is a
party shall have been discharged and any term loan receivables
regarding the same shall have been collected or otherwise
disposed of, so that immediately subsequent to Closing such
loans shall not be liabilities or assets of Action 1996.
(o) Action Bank Loans: As at Closing the total amount outstanding
under demand bank loans for operating purposes drawn down by
Action 1996 will not exceed the sum of $400,000.
In case any of the foregoing conditions which are not within the control of the
Purchaser shall not have been fulfilled on or before the Closing Date, the
Purchaser may terminate this Agreement by notice in writing to the Vendors and
Smithers in which event the Purchaser shall be released from all obligations
under this Agreement without prejudice to any rights or remedies it may have
against the Vendors and Smithers for non-fulfilment of such conditions, other
than the obligations of the Purchaser regarding confidentiality pursuant to
Section 2.02 hereof, but the Purchaser may waive compliance with any such
condition in whole or in part if it sees fit to do so, without prejudice to its
rights of termination in the event of non-fulfilment of any other condition in
whole or in part. Notwithstanding any other provision of this
<PAGE> 16
13.
Agreement, in the event that the transaction contemplated herein is not
completed because the Offering does not close, the Purchaser will have no claim
against the Vendors or Smithers unless the Vendors or Smithers are directly and
wilfully responsible for the failure of the Offering to close.
Section 5.02 Conditions for the Vendors' Benefit: The Vendors are not
obliged to consummate the transactions herein provided for unless, on the
Closing Date, each of the following conditions has been satisfied, it being
understood that these conditions are included for the exclusive benefit of the
Vendors and Smithers and may be waived in writing in whole or in part by the
Vendors and Smithers at any time:
(a) Representations and Warranties: The representations and
warranties of the Purchaser set forth in this Agreement shall
be true and correct on the Closing Date with the same force
and effect as if made on and as of such date and the Vendors
and Smithers shall have received a certificate of the
Purchaser dated as of the Closing Date, that such
representations and warranties are true and correct as at the
Closing Date with the same force and effect as if made on and
as of such date.
(b) Compliance: All of the terms, covenants and agreements set
forth in this Agreement to be complied with or performed by
the Purchaser at or before the Closing Date shall have been
complied with or performed by the Purchaser in all respects on
or before the Closing Date.
(c) Approvals: All necessary legal and corporate proceedings and
approvals, regulatory or otherwise, applicable to the
Purchaser, shall have been taken or obtained to permit the
parties to complete the transactions provided for herein.
(d) Purchaser's Counsel's Closing Opinion: The Vendors shall have
received the Purchaser's Counsel's Closing Opinion in form
reasonably satisfactory to Vendors' Counsel.
(e) Releases: Subject to Section 8.04, the Vendors and Smithers
shall have received documentation in form reasonably
satisfactory to Vendors' Counsel either:
(i) releasing each of them from all financial commitments
and support for Action 1996, including without
limitation guarantees of the indebtedness of Action
1996 given by any of them to bankers and to any other
third parties; or
(ii) fully indemnifying each of them by the Purchaser in
respect to such financial commitments and support for
Action 1996.
In case any of the foregoing conditions shall not have been fulfilled on or
before the Closing Date, the Vendors and Smithers may terminate this Agreement
by notice in writing to the Purchaser, in which event the Vendors and Smithers
shall be released from all obligations under
<PAGE> 17
14.
this Agreement without prejudice to any rights or remedies either of them may
have against the Purchaser for non- fulfilment of such conditions or the
obligations of the Purchaser regarding confidentiality pursuant to Section 2.02
hereof, but the Vendors and Smithers may waive compliance with any such
condition in whole or in part, if it sees fit to do so, without prejudice to
its rights of termination in the event of non-fulfilment of any other condition
in whole or in part.
ARTICLE SIX
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
Section 6.01 Representations and Warranties of the Vendors: Each of the
Vendors and Smithers jointly and severally represent and warrant to the
Purchaser, as of the date hereof, upon each of which representations and
warranties the Purchaser specifically relies, as follows:
(a) Incorporation: Action is now, and on the Closing Date Action
1996 will be, a corporation:
(i) duly incorporated and organized and validly existing
under the laws of its jurisdiction of incorporation;
and
(ii) in respect to Action 1996 on the Closing Date, with
all requisite corporate power and capacity to own,
operate, lease and dispose of the Assets or any
portion thereof, to carry on the Business, and in
respect to both Action and Action 1996 with all
requisite corporate power and capacity to execute and
deliver this Agreement and all other instruments and
documents relating hereto and perform all of its
obligations hereunder and thereunder.
(b) Capitalization:
(i) The authorized and issued capital of Action and
Action 1996 is set forth in Schedule C and all of the
shares set forth therein are validly issued and
outstanding as fully paid and non- assessable shares
and are the only issued and outstanding shares of
Action and Action 1996;
(ii) On the Closing Date the Vendors will be the
registered and beneficial owners of the Shares, free
and clear of any lien, privilege, pledge, option,
mortgage, hypothec, charge, or other encumbrance or
security interest of whatsoever nature or kind;
(iii) At Closing the Vendors shall have the power,
authority and right to sell their respective Shares
in accordance with the terms of this Agreement;
<PAGE> 18
15.
(iv) Except as disclosed in Schedule D there are no
shareholder agreements or other agreements relating
to the ownership, sale, transfer or assignment of any
issued or unissued shares or any other ownership
interests in Action and Action 1996;
(v) There are not now and on Closing there will not be
any outstanding subscriptions, options, rights,
warrants or other agreements or commitments
obligating or potentially obligating the Vendors or
Smithers, as the case may be, to sell or issue any
additional shares of any class or any securities
convertible into shares of any class or any right
capable of becoming an agreement, option or right of
first refusal for the purchase, subscription or issue
of any unissued shares of Action or Action 1996;
(c) Other Businesses: Action does not carry on any business other
than the Business.
(d) Subsidiaries: On the Closing Date there will be no
Subsidiaries of Action 1996.
(e) Dividends, Compensation:
(i) Action has not declared or paid a dividend since
December 31st, 1995. During the Interim Period,
Action will not declare, set aside or pay dividends
upon any of its shares, or make any other
distribution to its shareholder in respect of any of
its shares or effect any direct or indirect reduction
of capital, redemption, purchase or other acquisition
by it of any of its issued shares, except for a
dividend in specie of the Action Real Property to be
distributed to Naturally.
(ii) Since December 31st, 1995 Action has not increased,
and during the Interim Period Action shall not have
increased (except as may be approved in writing by
the Purchaser), the rates of salaries, commissions or
other remuneration paid or payable by Action, as the
case may be, to any of its directors, officers,
employees or agents or make any bonus payment to any
of them except in the ordinary course of business and
there are no such increases or bonuses authorized but
not implemented as at the date hereof.
(f) Non-Arms Length Agreements: Except as set forth in Schedule
E, Action has not entered into any contracts, commitments,
arrangements or understandings, directly or indirectly, with
any Person not dealing at arm's length with the Vendors,
Smithers or Action, including without limitation the Vendors
and Smithers. Except for amounts pertaining to salary, wages
and benefits paid in the ordinary course of business, there
are no amounts owing by Action to Smithers or any of her
Affiliates or Associates or by any of the foregoing to Action.
(g) Customers and Suppliers: Except in respect to the existing
contracts with Canada Post, which may be assumed by Action
1996 after the Closing at the sole
<PAGE> 19
16.
discretion of Canada Post, the Vendors and Smithers have no
knowledge of any termination, cancellation or modification in
the business relationship of Action with any of its material
customers and suppliers; and furthermore, such parties know of
no reason why any such material customers or suppliers will
terminate their relationship with Action because of the sale
of the Shares to the Purchaser.
(h) Records Complete: All material financial transactions of
Action have now and at Closing will have been properly
recorded in the books and records of Action. By Closing the
corporate records of Action and Action 1996 will contain a
true and complete record of all meetings and actions of its
shareholders and directors and of all share issuances and
transfers which have occurred prior to the Closing Date.
(i) Enforceable Agreement: This Agreement and all documents
delivered at Closing have been, or will have been at Closing,
duly authorized, executed and delivered to the Purchaser by
the Vendors and Smithers, and Action and Action 1996 as the
case may be, and are, or will be at Closing, valid and binding
obligations of the Vendors, Action, Action 1996 and Smithers
enforceable in accordance with their respective terms.
(j) Contracts:
(i) Material Contracts: Schedule F contains a complete
and accurate list of all material Contracts to which
Action is a party except those listed in other
schedules hereto;
(ii) No Breach: Except for the consents required under
Schedule G, Action is not in default under or in
breach of any material Contract except for defaults
or breaches which individually or in the aggregate
are not material and, to the best of the knowledge
and belief of the Vendors and Smithers, there exists
no state of facts which, after notice or lapse of
time or both, would constitute such a default or
breach by Action or any other party thereto and each
of such Contracts is now in good standing and in full
force and effect and Action is entitled to all rights
and benefits thereunder; and
(iii) Contracts Affected by Change of Ownership: Except as
disclosed in Schedule G, Action is not now nor at
Closing will Action 1996 be bound by any outstanding
Contract that would be affected in any material way
by a change of ownership of Action 1996 or that
requires prior approval of any such change of
ownership of Action 1996.
<PAGE> 20
17.
(k) Title to Property:
(i) Except as set forth in Schedule H, Action is, and
Action 1996 will be on the Closing Date, the owner of
the Assets free and clear of all liens, privileges,
pledges, options, mortgages, hypothecs, charges or
other encumbrances or security interests of
whatsoever nature or kind;
(ii) Except as set forth in Schedule I hereto, Action is
not a party to any leases of real property or
equipment; Action is not in default under any such
leases and except as set forth in Schedule H the
rights of Action thereunder are free and clear of all
liens, privileges, pledges, mortgages, hypothecs,
charges or other encumbrances or security interests
of whatsoever nature or kind;
(iii) Except as set forth in Schedules H and I, none of the
Assets is subject to any bailment, lease, conditional
sales contract, chattel mortgage, security interest
or other encumbrance; Action is not in default under
any such agreements and the rights of Action
thereunder are free and clear of all liens, pledges,
mortgages, charges or other encumbrances or security
interests of whatsoever nature or kind except as set
forth in such Schedules; and
(iv) Action does not lease any of its material Assets as
lessor or sub-lessor.
(l) Condition of Assets: All of the material tangible Assets used
in or in connection with the Business are in good condition,
repair and proper working order, reasonable wear and tear
excepted, and are suitable for the conduct of the Business as
currently conducted.
(m) Tax Matters: All Tax returns, declarations, remittances,
information returns and reports of every nature required to be
filed by or on behalf of Action and Action 1996, including but
not limited to remittances of payroll source deductions, have
been filed or remitted and such returns are complete and
accurate. No extensions of time in which to file any such
returns are in effect; all Taxes shown on such returns and all
assessments or reassessments of Tax, penalties and interest
payable by Action and Action 1996 has been paid; and no
further Taxes, interest or penalties are due with respect to
any taxation years. The income tax returns of Action and
Action 1996 for all taxation years up to and including the
year ended December 31, 1994 have been assessed by the federal
tax authorities, and there are no outstanding issues which
have been raised by such authorities for such years, except as
disclosed on Schedule J. No assessments or reassessments of
Tax payable by Action and Action 1996 are under discussion,
objection or appeal with any governmental authority except as
disclosed on Schedule J. To the extent that Tax liabilities
have accrued but have not become payable, they are adequately
reflected as liabilities on the books of Action and Action
1996. The reserves for Taxes on the Action Financial
Statements and the reserves for Taxes by Action
<PAGE> 21
18.
and Action 1996 as of the Closing Date will be sufficient for
the payment of any unpaid Taxes, interest and penalties which
may become payable as a result of any audit, assessment or
reassessment by any governmental authority in respect of any
period ending on or before the date of such balance sheets.
There are no outstanding agreements or waivers extending the
statute of limitations with respect to the assessment or
reassessment of any income tax or other Tax payable by Action
and Action 1996.
(n) No Breach Caused by this Agreement: Neither the execution nor
delivery of this Agreement nor the fulfilment or compliance
with any of the terms hereof will, with or without the giving
of notice and/or the passage of time, conflict with, or result
in a breach of the terms, conditions or provisions of, or
constitute a default under, the articles or by-laws, as
amended, of Action or Action 1996, or if the consents
contemplated in Schedule G are obtained, any Contract or any
judgment, decree or order to which the Vendors, Smithers,
Action, Action 1996 or the Business are subject, or will
require any consent or other action by any administrative or
governmental body. Except for the approvals contemplated in
section 5.01(a), the execution, delivery and performance of
this Agreement and compliance with the provisions hereof by
the Vendors and Smithers will not violate any provision of law
or any regulation by which the Vendors, Smithers, Action,
Action 1996 or the Business is bound.
(o) Litigation: Except as disclosed in Schedule J, there are not
now nor at Closing will there be, any actions, governmental
investigations, claims or demands or other proceedings,
including without limitation, grievances or arbitration
proceedings pursuant to any collective agreement, pending or
to the best of the knowledge and belief of the Vendors or
Smithers threatened before any court or administrative agency
against Action or Action 1996 or any of their respective
officers or directors in their capacities as such. There
exists no state of facts which after notice or lapse of time
or both could reasonably be expected to give rise to any such
action, governmental investigation, claim or demand or other
proceedings. No judgment, order or decree is currently
outstanding and enforceable against Action. All threatened or
pending claims, suits or actions against Action or any of its
officers or directors in their capacities as such which could
affect Action or the Business have been described in Schedule
J.
(p) Absence of Certain Changes or Events: During the period from
January 1, 1996 to the Closing Date:
(i) Business in Normal Course: the Business has, and will
have been, carried on in the normal course consistent
with previous fiscal periods;
(ii) Capital Expenditures: no capital expenditures,
including investments, in excess of $30,000.00 in the
aggregate will have been made by Action in 1996 and
no major capital expenditures in the aggregate
exceeding $10,000.00 will be authorized or incurred
by Action and Action 1996
<PAGE> 22
19.
during the Interim Period without the prior
authorization of the Purchaser, other than the
purchase of an awning for the Action Real Property
for a price not exceeding $13,000.00; and
(iii) Articles: during the Interim Period no amendments
will have been made to the articles or by-laws of
Action or Action 1996, except in connection with the
wind-up of Action into Action 1996 and the surrender
of its Certificate of Incorporation.
(q) No Brokers: None of the Vendors, Smithers or Action has
entered into any agreement that would entitle any Person to
any valid claim against the Purchaser or Action for a broker's
commission, finder's fee or any like payment in respect of the
purchase and sale of the Shares or any other matters
contemplated by this Agreement.
(r) Employee Matters: Except as set forth in Schedule K:
(i) Collective Agreements: Action is not now nor at
Closing will Action 1996 be a party to any collective
agreement with, or commitment to, any trade union or
employee association; has made any commitments to or
extended voluntary recognition to or conducted
negotiations with any trade union or employee
association with respect to any future agreements.
The Vendors and Smithers are not aware of any current
attempts to organize any employees or displace any
incumbent trade union or establish any trade union or
employee association in connection with Action other
than as disclosed on Schedule K;
(ii) Benefit Plans: except as set forth in Schedule K,
Action is not now nor at Closing will Action 1996 be
a party to nor operate any bonus, pension, profit
sharing, deferred compensation, retirement,
hospitalization insurance, life insurance, drug or
dental insurance, eye care, weekly indemnity, long
term disability, medical insurance, or similar plan
or practice, formal or informal, with respect to any
Employees or any other Person;
(iii) Employment Contracts: Action is not now bound nor at
Closing will Action 1996 be bound by any agreement
whether written or oral with any Employee providing
for a specified period of notice of termination or
providing for any fixed term of employment, and has
not now nor at Closing will have Employees who
cannot be dismissed with such period of notice as may
be required by applicable law. Schedule K contains a
complete and accurate list of each Employee of
Action as at the date hereof and their annual
remuneration;
(iv) Inactive Employees: Schedule K contains a complete
and accurate list of each Employee of Action who is
no longer on the payroll by reason of
<PAGE> 23
20.
pregnancy or sick leave, temporary lay-off or
short-term or long-term disability.
(s) Employee Plans: All employee benefit and welfare plans to
which Action contributes, or in which any of its Employees
participate or are eligible to participate have been
established, qualified and administered, in all respects, in
accordance with all applicable laws, regulations, orders or
other legislative, administrative or judicial promulgations
and in accordance with all agreements or understandings,
written or oral, between Action and its Employees. None of
such plans, nor any related trusts thereunder, is subject to
any pending investigation, examination or other proceeding
initiated by any governmental agency or instrumentality and
there exists no state of facts which after notice or lapse of
time or both could reasonably be expected to give rise to any
such investigation, examination or other proceeding. All
contributions required by the terms of such plans or by
applicable laws have been made, and Action has not and as of
the Closing Date Action 1996 will not have, any liability
(other than liabilities accruing after the Closing Date) with
respect to any such plans, except for current contributions
not yet due and payable based on compensation paid by Action
or Action 1996, as the case may be.
(t) Intellectual Property:
(i) All of the trade marks (including registered trade
marks and trade marks for which applications are
pending), trade names, designs (including registered
industrial designs and applications to register
industrial designs), (collectively, the "Trade
Marks") owned by Action or used or proposed to be
used under license or otherwise in the Business are
set out in Schedule L or in agreements listed in
Schedule M;
(ii) Except as disclosed in Schedule L, the Trade Marks
have not been licensed by Action to any other Person.
Except as disclosed in Schedule M, none of the Trade
Marks used or proposed to be used in the Business is
owned by the Vendors or Smithers or any of their
Affiliates or Associates (other than Action);
(iii) To the knowledge of the Vendors and Smithers, there
has been no unauthorized or improper use of any of
the Trade Marks likely to affect their
distinctiveness;
(iv) To the knowledge of the Vendors and Smithers, Action
has not infringed or breached, nor is infringing or
breaching any Intellectual Property rights of any
other Person; and except as disclosed in Schedule J,
none of the Vendors, Smithers nor Action has received
any notice of a claim of any infringement or breach
of any Intellectual Property rights of any other
Person;
<PAGE> 24
21.
(v) To the best of the Vendors' and Smithers knowledge
and belief, no Person has infringed or breached or is
infringing or breaching any of the Trade Marks used
or proposed to be used in connection with the
Business.
(u) Copies of Agreements, etc.: True, correct and complete copies
of all mortgages, leases, agreements, instruments and other
documents listed in the Schedules hereto, which have been
requested in writing by the Purchaser or Purchaser's Counsel
have been delivered or made available to the Purchaser, its
agents and representatives.
(v) Material Liabilities: There are no material liabilities of
Action of any kind whatsoever, whether or not accrued or
contingent and whether or not determined or determinable, in
respect of which Action is liable other than:
(i) liabilities to be disclosed on, reflected in or
provided for in the Action Financial Statements; and
(ii) liabilities disclosed or referred to in this
Agreement or in the Schedules attached hereto.
(w) Compliance with Applicable Laws: Action is conducting, and at
Closing Action 1996 will be conducting, the Business in
compliance in all material respects with an applicable
federal, provincial, municipal and local laws, rules and
regulations of each jurisdiction in which it carries on the
Business and Action is not in breach of any such laws, rules
or regulations, except for breaches which in the aggregate are
not material or which have been disclosed in writing to the
Purchaser. Action is duly licensed or registered and has
obtained all permits in each jurisdiction in which it owns or
leases property or carries on the Business, to enable the
Business to be carried on as now conducted and the Assets to
be owned, leased and operated, and all such licences, permits
and registrations are valid and subsisting and in good
standing and will be held by Action 1996 as of the Closing
Date. A complete and accurate list of all licences, permits
and registrations held by Action is set forth in Schedule M
hereto.
(x) Environment: The Action Real Property and its existing uses
and to the best of the Vendors' knowledge its prior uses
comply and have at all times complied with, and Action is not
in violation of, and has not violated, in connection with the
ownership, use, maintenance or operation of the Action Real
Property and the conduct of the Business thereon, any
applicable federal, provincial, municipal or local laws,
regulations, orders or approvals of governmental authorities
relating to environmental matters.
(y) Notice of Violation: No notices of any violation of any of the
matters referred to in the foregoing paragraph (y) relating to
the Action Real Property or its use have been received by
Action; and, to the knowledge of the Vendors and Smithers
there are no writs, injunctions, orders or judgments
outstanding, no lawsuits,
<PAGE> 25
22.
claims, proceedings or investigations pending or threatened,
relating to the ownership, use, maintenance or operation of
the Action Real Property, nor is there any basis for such
lawsuits, claims, proceedings or investigations being
instituted or filed.
(z) Absence of Guarantees: Except as set forth in Schedule N
hereto or as disclosed in the Action Financial Statements,
Action has not given or agreed to give, or is a party to or
bound by, any guarantee of the indebtedness or other
obligations of any other Person.
(bb) Bank Accounts, etc.: Set forth in Schedule O is the name of
each financial institution in which Action maintains a bank
account, trust account or safety deposit box, together with
the numbers and description of all such accounts and the names
of all Persons authorized to draw thereon or who have access
thereto.
(cc) Insurance: Action maintains such policies of insurance,
issued by responsible insurers, as are appropriate to the
Business and the Assets, in such amounts and against such
risks as are customarily carried and insured against by owners
of comparable businesses, properties and assets, including
without limitation key man insurance and term life insurance
on the lives of key executives. Notwithstanding the
foregoing, the Assets are insured for their full replacement
value. All of the foregoing policies of insurance are now, and
up to and including the Closing Date will be, in full force
and effect and Action is not in default, whether as to the
payment of premiums or otherwise, under the terms of any such
policy.
(dd) Necessary Property: The tangible property owned, licensed
and/or leased by Action and the intangible personal property,
including, without limitation, the Trade Marks owned by or
licensed to Action constitutes, at the date hereof, and will,
at the Closing Date, constitute all of such property necessary
for the conduct of the Business in the manner and to the
extent presently conducted.
(ee) Non-Resident: Each of the Vendors is not a non-resident of
Canada within the meaning of Section 116 of the Income Tax Act
(Canada).
(ff) Accounts Receivable and Accounts Payable: To the knowledge of
the Vendors and Smithers based on past practice and
experience:
(i) all individual accounts receivable of Action are good
and collectible within ninety (90) days from the
invoice date of such accounts at the aggregate
recorded amounts thereof, net of usual provisions for
bad debt; and
(ii) all accounts payable of Action are current and have
not been outstanding for a period longer than
forty-five (45) days prior to the date hereof, except
for any specific accounts which in the ordinary
course of business
<PAGE> 26
23.
and with the concurrence of Action are to be paid at
a later date, and which have been disclosed in
writing to the Purchaser.
(gg) Bank Indebtedness of Action: As at the date hereof and as at
the Closing Date the Indebtedness of Action or Action 1996 to
its banker under its operating line of credit does not and
shall not exceed the sum of $400,000.00, but not including a
computer purchase loan in the approximate amount of $61,569.81
(as of April 30th, 1996) which the Purchaser has agreed to
assume.
(hh) Adjustments: The Vendors and Smithers have previously
provided the Purchaser in writing with certain adjustments to
the historical operating results of Action. These adjustments
represent certain costs and expenses which were unique to
Action when it was operated by Action 1996 and its
shareholders. To the best of the knowledge and belief of the
Vendors and Smithers, these costs and expenses will not be
ongoing costs of Action 1996 subsequent to the Closing, except
as to amounts which are immaterial.
(ii) Not Misleading: The foregoing representations and warranties
and statements of fact (including the Schedules related
thereto) do not contain any untrue statement of material fact
or omit to state any material fact necessary to make any such
representation, warranty or statement not misleading.
Section 6.02 Representations and Warranties of the Purchaser: The Purchaser
represents and warrants to the Vendors, as of the date hereof, upon each of
which representations and warranties the Vendors specifically relies, as
follows:
(a) Good Standing: The Purchaser is now, and on the Closing Date
will be, a corporation:
(i) duly incorporated and organized and validly
subsisting under the laws of the State of Delaware;
and
(ii) having the corporate power and authority to purchase
the Shares and to perform all its obligations
hereunder.
(b) Enforceable Agreement: This Agreement and all documents
delivered at Closing, including without limitation the Dynamex
Note, have been, or will have been at Closing, duty
authorized, executed and delivered to the Vendors by the
Purchaser and are, or will be, at Closing, valid and binding
obligations of the Purchaser, enforceable in accordance with
their respective terms.
(c) No Breach Caused by this Agreement: Neither the execution nor
delivery of this Agreement nor the fulfilment or compliance
with any of the terms hereof will, with or without the giving
of notice and/or the passage of time, conflict with, or result
in a breach of the terms, conditions or provisions of, or
constitute a default under, the articles or by-laws, as
amended, of the Purchaser or any contract to
<PAGE> 27
24.
which the Purchaser is a party or by which it is bound or any
judgment, decree or order to which the Purchaser is subject,
or, except for the approvals contemplated in Section 5.01(a),
will require any consent or other action by any administrative
or governmental body. The execution, delivery and performance
of this Agreement and compliance with the provisions hereof by
the Purchaser will not violate any provision of law or any
regulation by which the Purchaser is bound.
Section 6.03 Indemnification:
(a) Each of the Vendors and Smithers jointly and severally
covenants and agrees to indemnify and save harmless the
Purchaser, Action and Action 1996, from and against all
claims, demands, actions, causes of action, liabilities,
obligations, (including, without limitation, any removal or
remedial action required by law, regulation, order or
governmental action or requested by any governmental
authority) damages, losses, costs and expenses (including,
without limitation, reasonable legal fees) (hereinafter
sometimes collectively referred to as the "Claims") which may
be made or brought against the Purchaser or Action 1996 or any
one or more of them or which any one or more of them may
suffer or incur as a result of, in respect of or arising out
of any matter or thing relating to: (i) the conduct of the
Business prior to the Closing Date, other than the liabilities
set forth on the balance sheet included in the Action
Financial Statements or arising after December 31, 1995 in the
ordinary course of business; (ii) any non-fulfilment of any
covenant or agreement on the part of the Vendors or Smithers
under this Agreement; (iii) any breach of any representation
or warranty of the Vendors and Smithers contained herein or in
any Schedule attached hereto or in any certificate or other
document furnished by such parties pursuant to this Agreement;
(iv) Claims in respect of litigation or threatened litigation
whether or not referred to in Schedule J, arising from actions
of the Vendors, Smithers, Action or Action 1996 (including a
failure to act) taken or not taken out of the ordinary course
of business prior to the Closing Date; or (v) claims arising
from operating contracts of Action and Action 1996 which have
not been disclosed to the Purchaser or which are not referred
to on the Schedules hereto.
(b) Each of the Vendors and Smithers jointly and severally
covenants and agrees to indemnify and save harmless Action and
Action 1996 from and against Taxes (including interest and
penalties in respect thereof) payable by Action or Action 1996
in respect of any period ending on or before the Closing Date
as a result of any assessment or re-assessment of Taxes by any
taxing authority after the Closing Date.
(c) The Purchaser hereby covenants and agrees to indemnify and
save harmless the Vendors and Smithers from and against all
Claims which may be made or brought against any of them or
which any of them may suffer or incur as a result of, in
respect of or arising out of any non-fulfilment of any
covenant or agreement on the part of the Purchaser under this
Agreement or any breach of any
<PAGE> 28
25.
representation or warranty of the Purchaser contained herein
or in any certificate or other document furnished by the
Purchaser pursuant to this Agreement.
(d) No claim shall be made by any party for indemnification under
this Section 6.03 unless and until the aggregate amount
claimed exceeds $10,000.00. The maximum aggregate liability
of the Vendors and Smithers for Claims referred to in Section
6.03 (a) shall be the sum of $600,000.00. Furthermore, the
amount actually paid by either party to any other party
hereunder for indemnification under this Section 6.03 shall be
limited to the actual after-tax loss incurred by such other
party in respect to such Claim, and neither party shall be
liable to the other party hereunder in respect to any Claims
which are covered by insurance policies of either party which
are not impaired, cancelled or non-operable as a result of
such Claims.
(e) If the claim or breach, failure or non-fulfilment which is
alleged to be the basis for a Claim arises from or is related
to a claim involving a person or entity not a party to this
Agreement, then the party (the "Indemnitor") who would be
required to indemnify the other party (the "Indemnitee")
pursuant to this Section 6.03 shall have the right, but not
the obligation, acting in good faith and without delay, to
participate in any discussions with such third parties or
other proceedings regarding such claim and to litigate or
otherwise contest or compromise any such claim (at the expense
of the Indemnitor), as the Indemnitor, in its, his or her sole
discretion deems appropriate. The Indemnitee shall be
obligated to cooperate with the Indemnitor in the
investigation or defense of any such proceeding and shall have
the right to participate, at its, his or her own expense, in
the defense of any action or proceedings brought in connection
with any such claim.
Section 6.04. Non-Merger: Each party hereby agrees that all provisions of
this Agreement including, without limitation, the warranties, representations
and indemnities contained in Article Six shall survive the execution and
delivery of this Agreement and any and all documents delivered in connection
herewith and the consummation of the transaction contemplated hereby for the
following periods:
(a) in respect to Claims other than Claims pertaining to Taxes,
for a period of eighteen (18) months following the Closing
Date; and
(b) in respect to Claims pertaining to Taxes, for a period
commencing on the Closing Date and ending in each specific
circumstance on the expiry of the time limit for the
assessment or re-assessment of Taxes paid or payable by Action
up until the Closing Date.
<PAGE> 29
26.
ARTICLE SEVEN
DYNAMEX OFFERING
Section 7.01 Management Co-operation: The Vendors, Smithers, Action and
Action 1996 shall co-operate with the Purchaser, and cause all of the
management of Action and Action 1996 to co-operate with the Purchaser and its
agents, representatives, counsel and underwriters, in preparing documentation
required for the Offering, in the sale of securities pursuant to the Offering
and in the closing of the Offering.
Section 7.02 Material Change: The Vendors and Smithers each agree to notify
the Purchaser immediately in writing of any material adverse change in the
Business or Assets during the Interim Period.
ARTICLE EIGHT
ADDITIONAL COVENANTS OF THE PARTIES
Section 8.01 Continuity of Senior Personnel: The Vendors and Smithers
covenant to use their best efforts before the Closing Date to ensure that
management personnel involved in the management and operation of the Business
will continue in the employ of Action 1996, after the Closing.
Section 8.02 Continuity of Customers and Suppliers: The Vendors and
Smithers covenant to use their best efforts before the Closing Date to ensure
that existing customers of, and suppliers to, the Business will continue to
deal with Action 1996, after the Closing on substantially the same terms and
conditions that were in effect prior to the Closing.
Section 8.03 Interim Period: During the Interim Period, the Vendors and
Smithers shall cause Action and Action 1996 to carry on the Business in the
ordinary course consistent with past practice. Without the prior written
consent of the Purchaser, during the Interim Period Action and Action 1996
shall not hire or fire any senior Employees; change the terms of employment of
any Employees other than in the normal course of the Business; terminate any
material Contract; or enter into any Contract other than in the ordinary course
of the Business; or fail to comply with Section 6.01(e) hereof.
Section 8.04 Discharge of Royal Bank Guarantees: The Purchaser covenants
with the Vendors and Smithers to use all reasonable efforts to obtain the
discharge of guarantees (the "RBC Guarantees") given to The Royal Bank of
Canada by Affiliates of Action 1996 to support the indebtedness of Action 1996
with the said Bank in connection with the Business. The Purchaser shall use
all reasonable efforts to obtain such discharge of the RBC Guarantees by the
Final Payment Date. If such discharge has not been obtained by the Final
Payment Date, Vendors' Counsel shall continue to hold the certificates
representing the Shares in escrow pursuant to Section 8.05 until the earlier of
(i) the discharge of the RBC Guarantees; or (ii) the close of business in
Halifax on Friday, August 16th, 1996. If the discharge of the RBC Guarantees
has
<PAGE> 30
27.
not been obtained by the close of business in Halifax on Friday, August 16th,
1996, whether by repayment of such loans or otherwise, Vendors' Counsel on or
about August 16th, 1996 shall give written notice to the Purchaser that unless
such releases are obtained thirty days from the date of such notice, Vendors'
Counsel shall return the said share certificates to the Vendors for disposal as
they see fit.
Section 8.05 Escrow Arrangements: On the Closing Date the Vendors shall
deliver to Vendors' Counsel certificates (the "Certificates") representing the
Shares, duly endorsed in blank for transfer, to be held in escrow by Vendors'
Counsel in accordance with the following:
(i) if on the Final Payment Date the Purchaser shall have obtained the
discharge of the RBC Guarantees pursuant to Section 8.04, Vendors'
Counsel shall deliver the Certificates to the Purchaser against
payment by the Purchaser to the Vendors of the principal amount
outstanding and accrued interest under the Promissory Note;
(ii) if by the Final Payment Date the Purchaser has not obtained the
discharge of the RBC Guarantees, notwithstanding the payment by the
Purchaser to the Vendors of the principle amount outstanding and
accrued interest under the Promissory Notice on the Final Payment
Date, Vendors' Counsel shall continue to hold the Certificates in
escrow until the earlier of (i) the discharge of the RBC Guarantees;
or (ii) the expiry of the thirty-day period referred to in the written
notice to be given by Vendors' Counsel to the Purchaser on or about
August 16, 1996, pursuant to Section 8.04. If the discharge of the
RBC Guarantees has not been obtained by the expiry of the said
thirty-day period, Vendors' Counsel shall deliver the Certificates
representing the Shares to the Vendors for disposal as they see fit.
ARTICLE NINE
GENERAL
Section 9.01 Interpretation:
(a) Sections and Headings: The division of this Agreement into
articles, sections, subsections, paragraphs and subparagraphs
and the insertion of headings and any index are for
convenience of reference only and shall not affect the
construction or interpretation hereof.
(b) Extended Meanings: Words importing the singular number include
the plural and vice-versa; words importing gender include all
genders.
(c) Funds: All dollar amounts referred to in this Agreement are in
lawful currency of Canada.
(d) GAAP: All references to generally accepted accounting
principles shall be to generally accepted accounting
principles in Canada as more particularly described in the
handbook of the Canadian Institute of Chartered Accountants.
<PAGE> 31
28.
Section 9.02 Further Assurances: Each of the parties hereto shall from time
to time at the other's request and expense and without further consideration,
execute and deliver such other instruments of transfer, conveyance and
assignment and take such further action as the other may require to more
effectively complete any matter provided for herein.
Section 9.03 Entire Agreement: This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof
except as specifically set forth or referred to herein. This Agreement
supersedes any prior or contemporaneous agreements, negotiations and
discussions of the parties in respect of the subject matter hereof, including
without limitation a letter of intent dated February 19, 1996. No amendment or
waiver of this Agreement shall be binding unless executed in writing by the
parties and no such amendment or waiver shall extend to anything other than the
specific subject matter thereof. The failure at any time of any party to insist
on strict performance of any provision of this Agreement shall not limit the
ability of that party to insist at any future time whatsoever on the
performance of the same or any other provision (except insofar as that party
may have given a valid and effective written waiver or release).
Section 9.04 Invalidity of Provisions: The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision hereof and any such invalid or
unenforceable provision shall be deemed to be severable.
Section 9.05 Applicable Law: This Agreement shall be governed and construed
in accordance with the laws of the Province of Nova Scotia and the laws of
Canada applicable therein.
Section 9.06 Notices: Any notice required or permitted to be given
hereunder shall be in writing and shall be effectively given if (i) delivered
personally, (ii) sent by prepaid courier service or mail, or (iii) sent on any
Business Day by telecopier, addressed, in the case of notice to the Vendors and
Smithers, as follows:
(a) (i) David Nantau
34 Lakefront Drive
Hammonds Plains, Nova Scotia
B4B 1L3
Telecopier: (902) 468-2765
(ii) Nancy Smithers and Naturally
c/o Secunda Marine Services Limited
1 Canal Street
P.O. Box 605
Dartmouth, Nova Scotia
B3Y 3Y9
Telecopier: (902) 463-7678
<PAGE> 32
29.
and in the case of notice to the Purchaser, addressed as follows:
(b) Dynamex Inc.
2630 Skymark Avenue
Suite 610
Mississauga, Ontario
L4W 5A4
Attention: President
Telecopier: (905) 238-6989
and in the case of notice to Action and Action 1996, addressed as follows:
(c) Action Delivery and Messenger Service Limited
90 Simmonds Drive
Dartmouth, Nova Scotia
B3B 1P6
Telecopier: (902) 468-2765
and in all cases so sent by means of electronic communication, so confirmed.
Any notice so given is deemed conclusively to have been given and received on
the date when so personally delivered or sent by telex, telecopier or other
electronic communication, and on the third Business Day following the sending
thereof by mail or prepaid courier service. Any party hereto or others
mentioned above may change any particulars of its address for notice by notice
to the others in the manner aforesaid. No notice may be delivered by mail
during an actual or apprehended mail disruption.
Section 9.07 Successors and Assigns: This Agreement enures to the benefit
of and is binding upon the parties hereto and their respective successors and
permitted assigns. Subject to Section 9.08, no party may assign any of its
rights under this Agreement without the prior written consent of the other
parties.
Section 9.08 Assignment by Dynamex: At any time prior to the Closing Date,
the Purchaser may assign all of its rights, benefits and obligations under this
Agreement by notice in writing to the other parties, to a subsidiary
incorporated under the laws of Canada or a province thereof, provided that the
Purchaser shall remain jointly and severally liable with such subsidiary after
such assignment for the performance of the obligations of the Purchaser under
this Agreement. In the event of any such assignment, the representations and
warranties set forth in Section 6.02 shall be deemed to have been made by both
the Purchaser and the assignee subsidiary.
Section 9.09 Remedies Cumulative: The rights and remedies of the parties
under this Agreement are accumulative and in addition to and not in
substitution for any rights or remedies provided by law. Any single or partial
exercise by any party hereto of any right or remedy for default or breach of
any term, covenant or condition of this Agreement does not waive, alter,
<PAGE> 33
30.
affect or prejudice any other right or remedy to which such party may be
lawfully entitled for the same default or breach.
Section 9.10 Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and which taken
together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED AND DELIVERED ) "N. Smithers" l/s
) ------------------------------------------
in the presence of: ) Nancy Smithers
)
)
"G. Baker" ) "D. Nantau" l/s
- --------------------------------- ------------------------------------------
Witness ) David Nantau
)
)
)
NATURALLY NOVA SCOTIA HEALTH
PRODUCTS LIMITED
Per: "N. Smithers"
---------------------------------
Name: Nancy Smithers
Title: President
Per: "N. Smithers"
---------------------------------
Name: Nancy Smithers
Title: Secretary
2306080 NOVA SCOTIA LIMITED
Per: "D. Nantau"
---------------------------------
Name: David Nantau
Title: President
c/s
Per: "N. Smithers"
---------------------------------
<PAGE> 34
31.
Name: Nancy Smithers
Title: Secretary
DYNAMEX INC.
Per: "Robert P. Capps"
---------------------------------
Name: Robert P. Cappa
Title: Vice-President
c/s
Per: "M. Piccolo"
---------------------------------
Name: Martin Piccolo
Title: Secretary
ACTION DELIVERY AND MESSENGER
SERVICE LIMITED
Per: "D. Nantau"
---------------------------------
Name: David Nantau
Title: President
c/s
Per: "N. Smithers"
---------------------------------
Name: Nancy Smithers
Title: Secretary
<PAGE> 1
EXHIBIT 4.1
================================================================================
RIGHTS AGREEMENT
Dated as of July 5, 1996
between
DYNAMEX INC.
and
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
- -------
<S><C> <C>
1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Issuance of Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Form of Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. Countersignature and Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. Transfer, Split Up, Combination and Exchange of Rights Certificates: Mutilated, Destroyed, Lost or Stolen
Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. Exercise of Rights: Purchase Price: Expiration Date of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Cancellation and Destruction of Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Reservation and Availability of Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10. Record Date of Preferred Stock Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11. Adjustment of Purchase Price, Number of Shares or Number of Rights. . . . . . . . . . . . . . . . . . . . . . . 14
12. Certificate of Adjusted Purchase Price or Number of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. . . . . . . . . . . . . . . . . . . . . . 23
14. Fractional Rights and Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. Rights of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16. Agreement of Holders of the Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17. Rights Certificate Holder Not Deemed a Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
18. Concerning the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
19. Merger or Consolidation of the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
20. Duties of the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
21. Change of the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
22. Issuance of New Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
23. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
25. Notice to Holders of Rights Certificates of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
26. Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
29. Determinations and Actions by the Board of Directors. etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
30. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
Exhibit A - Form of Certificate of Designation Establishing Series A
Junior Participating Preferred Stock
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights to Purchase Shares of Series A Junior
Participating Preferred Stock
ii
<PAGE> 4
RIGHTS AGREEMENT
Rights Agreement dated as of July 5, 1996 (the "Agreement") between
Dynamex Inc., a Delaware corporation (the "Company"), and Harris Trust and
Savings Bank, an Illinois banking corporation (the "Rights Agent").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend of one preferred stock purchase right (individually a
"Right" and collectively the "Rights") for each share of Common Stock (as
hereinafter defined) of the Company outstanding on May 31, 1996 (the "Record
Date"), each Right representing the right to purchase one one-hundredth of a
share of Preferred Stock (as hereinafter defined) upon the terms and subject to
the conditions herein set forth, and has further authorized and directed (i)
the issuance of one Right with respect to each share of Common Stock which
shall become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date (as each
of such terms is hereinafter defined) and (ii) the issuance of one Right with
respect to each share of Common Stock which shall become outstanding between
the Distribution Date and the earlier of the Redemption Date and the Final
Expiration Date by reason of the exercise of any option, warrant, right or
conversion or exchange privilege contained in any option, warrant, right or
convertible or exchangeable security (other than the Rights) issued by the
Company prior to the Distribution Date, unless the Company's Board of Directors
shall expressly provide to the contrary at the time of issuance of any such
option, warrant, right or convertible or exchangeable security.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms have the respective meanings indicated.
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock of the Company
then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding such shares of Common Stock for
or pursuant to the terms of any such plan and (iv) any of the following named
parties or any affiliates thereof: (a) Cypress Capital Partners I, L.P.; or
(b) James M. Hoak. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition by the Company of its shares
of Common Stock which, by reason of reducing the number of such shares of
Common Stock outstanding, increases the number of shares of Common Stock
Beneficially Owned by such Person to 15% or more of such shares of Common Stock
then
<PAGE> 5
outstanding; provided, however, that if any Person, other than a Person
excepted in the first sentence of this definition, shall become the Beneficial
Owner of 15% or more of such outstanding shares of Common Stock by reason of
any purchase by the Company of its shares of Common Stock and shall, after such
purchase, become the Beneficial Owner of any additional such shares of Common
Stock, then such Person shall be deemed to be an "Acquiring Person".
(b) "Adjustment Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii).
(d) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement; provided,
however, that any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding shares of
Common Stock of the Company for or pursuant to the terms of any such plan shall
not be deemed an Affiliate or Associate.
(e) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "Beneficially Own," any securities which:
(i) such Person and such Person's Affiliates and Associates
beneficially own, directly or indirectly;
(ii) such Person and such Person's Affiliates or Associates,
directly or indirectly, have: (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than
customary agreements with and among underwriters and selling group
members with respect to a bona fide public offering of securities),
upon the exercise of conversion or exchange rights, rights (other than
the Rights), warrants or options or otherwise; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own, (I) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, (II) securities issuable upon
exercise of the Rights at any time prior to the occurrence of an
Adjustment Event or (III) securities issuable upon exercise of the
Rights from and after the occurrence of an Adjustment Event if such
Rights were acquired by such Person or such Person's Affiliates or
Associates prior to the Distribution Date, pursuant to Section 3(a) or
Section 22 or pursuant to Section 11(a)(i) in connection with an
2
<PAGE> 6
adjustment made with respect to any of the Rights heretofore specified
in this clause (III); or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to Beneficially
Own, any security if the agreement, arrangement or understanding to
vote such security (I) arises solely from a revocable proxy or consent
given to such Person or any of such Person's Affiliates or Associates
in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act or (II) is made in connection with,
or is to otherwise participate in, a proxy or consent solicitation
made or to be made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act, in the case
of either clause (I) or (II) of this proviso whether or not such
agreement, arrangement or understanding is also then reportable by
such Person on Schedule 13D promulgated under the Exchange Act (or any
comparable or successor report then in effect); or
(iii) are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding (other
than customary agreements with and among underwriters and selling
group members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except to
the extent contemplated by the proviso to Section l(e)(ii)(B)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition to the contrary, (A) the
phrase "then outstanding," when used with reference to a Person's Beneficial
Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding, plus the number or amount of such
securities not then actually issued and outstanding which such Person would be
deemed to Beneficially Own under this definition; (B) any agreement,
arrangement or understanding (whether or not in writing), or any communication
or discussion, among two or more Persons with respect to any matter relating to
the management, operation or conduct of the business of the Company, including
any discussion or agreement on, or any communication with respect to, a
position with respect to any such matter and the disclosure of such
communication, discussion, agreement or position to other Persons (including
shareholders of the Company) or to the Company shall not constitute an
agreement, arrangement or understanding contemplated by Section l(e)(ii)(B);
and (C) a Person shall not be deemed to be the "Beneficial Owner" of, or to
"Beneficially Own," pursuant to subparagraph (i), (ii) or (iii) of this
subsection (e), shares of Common Stock or other securities of the Company (l)
beneficially owned by the Company, any Subsidiary of the Company, any employee
benefit plan of the Company
3
<PAGE> 7
or of any Subsidiary of the Company or any entity holding shares of Common
Stock of the Company for or pursuant to the terms of any such plan; or (ll) if
such Person is engaged in the business as an underwriter of securities and
acquired such securities through such Person's participation in good faith in a
firm commitment "underwriting" registered under the Securities Act of 1933, as
amended, until the expiration of forty days after the date of such acquisition.
(f) "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of Texas are
authorized or obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean 5:00 P.M.,
Dallas time, on such date or, if such date is not a Business Day, then 5:00
P.M., Dallas time, on the next succeeding Business Day.
(h) "Common Stock" when used with reference to the Company, shall
mean the Common Stock, $.01 par value, of the Company. "Common Stock," when
used with reference to any Person other than the Company, shall mean the
capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person
or Persons which ultimately control such first-mentioned Person.
(i) "Current Per Share Market Price" shall have the meaning set
forth in Section 11(d)(i).
(j) "Current Value" shall have the meaning set forth in Section
11(a)(iii).
(k) "Disinterested Director" shall mean any member of the
Company's Board of Directors who is unaffiliated with an Acquiring Person or
any Affiliate or Associate of an Acquiring Person and was a member of the
Company's Board of Directors prior to the time that an Acquiring Person became
such, and any successor of a Disinterested Director who is unaffiliated with an
Acquiring Person or any Affiliate or Associate of an Acquiring Person and is
recommended to succeed a Disinterested Director by a majority of Disinterested
Directors then on the Company's Board of Directors.
(l) "Distribution Date" shall have the meaning set forth in
Section 3(a).
(m) "Equivalent Common Stock" shall have the meaning set forth in
Section 11(a)(iii).
(n) "Equivalent Preferred Stock" shall have the meaning set forth
in Section 11(b).
4
<PAGE> 8
(o) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(p) "Exchange Rate" shall have the meaning set forth in Section
24(a).
(q) "Final Expiration Date" shall have the meaning set forth in
Section 7(a).
(r) "Group" shall mean two or more Persons acting as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of the shares of Common Stock of the Company.
(s) "Person" shall mean any individual, firm, corporation,
partnership or other entity or Group, and shall include any successor (by
merger or otherwise) thereof; provided, however, that when two or more Persons
act as a partnership, limited partnership, syndicate or other Group for the
purpose of acquiring, holding or disposing of the shares of Common Stock of the
Company, such partnership, limited partnership, syndicate or other Group shall
be deemed a single "Person".
(t) "Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock, without par value, of the Company having the rights and
preferences set forth in the Certificate of Designation attached to this
Agreement as Exhibit A.
(u) "Principal Party" shall have the meaning set forth in Section
13(b).
(v) "Purchase Price" shall have the meaning set forth in Section
4.
(w) "Record Date" shall have the meaning set forth in the recital
clause at the beginning of this Agreement.
(x) "Redemption Date" shall have the meaning set forth in Section
7(a).
(y) "Rights" shall have the meaning set forth in the recital
clause at the beginning of this Agreement.
(z) "Rights Certificate" shall have the meaning set forth in
Section 3(a).
(aa) "Section 11(a)(ii) Adjustment Date" shall have the meaning set
forth in Section 11(a)(iii).
(bb) "Section 11(a)(ii) Event" shall mean the event transaction set
forth in Section 11(a)(ii).
(cc) "Section 13 Event" shall mean any event or transaction set
forth in clause (i), (ii) or (iii) of Section 13(a).
5
<PAGE> 9
(dd) "Share Acquisition Date" shall mean the first date on which
there shall be a public announcement by the Company or an Acquiring Person that
an Acquiring Person has become such.
(ee) "Spread" shall have the meaning set forth in Section
11(a)(iii).
(ff) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(gg) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii).
(hh) "Summary of Rights" shall have the meaning set forth in
Section 3(b).
(ii) "Trading Day" shall have the meaning set forth in Section
11(d)(i).
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with
the terms and conditions hereof. The Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents
as it may deem necessary or desirable upon ten (10) days' prior written notice
to the Rights Agent. The Rights Agent shall have no duty to supervise, and
shall in no event be liable for the acts or omissions of any such Co-Rights
Agent. In the event the Company appoints one or more Co-Rights Agents, the
respective duties of the Rights Agent and of any Co-Rights Agents shall be as
the Company shall determine.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES. (a) Until the
earlier of (i) the 10th day after the Share Acquisition Date and (ii) the 10th
Business Day (or such later date as may be determined by action of the Board of
Directors of the Company prior to such time as any Person shall become an
Acquiring Person) after the date of (x) the commencement by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company or any entity holding shares of
Common Stock of the Company for or pursuant to the terms of any such plan) of,
or (y) the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding such shares
of Common Stock for or pursuant to the terms of any such plan) to commence, a
tender or exchange offer the consummation of which would result in any Person
becoming the Beneficial Owner of such shares of Common Stock aggregating 15% or
more of such shares of Common Stock then outstanding, including any such date
which is after the date of this Agreement and prior to the issuance of the
Rights (the earlier of clause (i) and (ii) being hereinafter called the
"Distribution Date"), the Rights shall be evidenced (subject to the provisions
of Section 3(b)) by the certificates for shares of Common Stock (which
certificates shall also be
6
<PAGE> 10
deemed to be Rights Certificates) and not by separate Rights Certificates, and
the right to receive Rights Certificates shall be transferable only in
connection with the transfer of such shares of Common Stock. As soon as
practicable after the Distribution Date or, with respect to any such shares of
Common Stock issued on or after the Distribution Date and prior to the earlier
of the Redemption Date and the Final Expiration Date by reason of the exercise
of any option, warrant, right or conversion or exchange privilege contained in
any option, warrant, right or convertible or exchangeable security (other than
the Rights) issued by the Company prior to the Distribution Date, unless the
Company's Board of Directors shall expressly provide to the contrary at the
time of the issuance of any such option, warrant, right or convertible or
exchangeable security, simultaneously with the issuance of such shares of
Common Stock, the Company shall prepare and execute, the Rights Agent shall
countersign and the Company shall send or cause to be sent (or the Rights Agent
will, if requested, send, at the Company's expense), by first-class mail,
postage prepaid, to each record holder of such shares of Common Stock as of the
Close of Business on the Distribution Date or, with respect to shares of Common
Stock issued on or after the Distribution Date (unless otherwise provided with
respect thereto as aforesaid), to the record holder of such shares of Common
Stock on the date of issuance, at the address of such holder shown on the
records of the Company, a Rights Certificate in substantially the form of
Exhibit B hereto (a "Rights Certificate"), evidencing one Right for each such
share of Common Stock so held. As of and after the Distribution Date, the
Rights shall be evidenced solely by such Rights Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company shall send a copy of the Summary of Rights to Purchase Series A Junior
Participating Preferred Stock, in substantially the form of Exhibit C hereto
(the "Summary of Rights"), by first-class mail, postage prepaid, to each record
holder of shares of Common Stock of the Company as of the Close of Business on
the Record Date, at the address of such holder shown on the records of the
Company. Certificates for shares of Common Stock of the Company outstanding as
of the Record Date, until the Distribution Date or the earlier of the
Redemption Date or the Final Expiration Date, shall be deemed also to
constitute certificates for the Rights associated with the shares of Common
Stock represented by such certificates, together with a copy of the Summary of
Rights attached thereto, and the registered holders of the shares of Common
Stock represented thereby shall also be registered holders of the associated
Rights. Until the Distribution Date or the earlier of the Redemption Date and
the Final Expiration Date, the surrender for transfer of any such certificate,
with or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the shares of Common
Stock represented thereby.
(c) Certificates for shares of Common Stock of the Company which
become outstanding (including, without limitation, shares of Common Stock
referred to in the last sentence of this subsection (c) which shall be
subsequently reissued) after the Record Date and prior to the earliest of the
Distribution Date, the Redemption Date and
7
<PAGE> 11
the Final Expiration Date shall also be deemed to constitute certificates for
the Rights, but shall have impressed, printed or written thereon, or otherwise
affixed thereto, the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement, dated as of
July 5, 1996 (the "Rights Agreement"), between Dynamex Inc. and Harris
Trust and Savings Bank, the terms of which are incorporated herein by
reference and a copy of which is on file at the principal executive
office of Dynamex Inc. Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
Dynamex Inc. will mail to the holder of this certificate a copy of the
Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances described in the Rights
Agreement, Rights issued to or held by any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently
held by or on behalf of such Person or any subsequent holder, may
become null and void.
Certificates containing the foregoing legend, until the Distribution
Date or the earlier of the Redemption Date and the Final Expiration Date, shall
also be deemed to constitute certificates for the Rights associated with the
shares of Common Stock represented by such certificates, and the surrender for
transfer of any such certificate shall also constitute the transfer of the
Rights associated with the shares of Common Stock represented thereby. In the
event that the Company shall purchase or acquire any of its shares of Common
Stock after the Record Date but prior to the Distribution Date, any Rights
associated with such shares of Common Stock shall be deemed cancelled and
retired so that the Company shall not be entitled to exercise any Rights
associated with shares of Common Stock which are no longer outstanding.
SECTION 4. FORM OF RIGHTS CERTIFICATES. (a) The Rights
Certificates (and the Form of Election to Purchase and Certification of Status
and the Form of Assignment and Certification of Status to be printed on the
reverse thereof) shall be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. The Rights Certificates shall be in a machine printable format and in a
form reasonably satisfactory to the Rights Agent. Subject to the provisions of
Sections 11 and 22, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date (or, in the case of Rights with respect to shares
of Common Stock originally issued after the
8
<PAGE> 12
Record Date, the same date as the certificate evidencing such shares of Common
Stock), shall show the date of countersignature and shall entitle the holders
thereof to purchase such number of one one-hundredths of a share of Preferred
Stock as shall be set forth therein at the price per one one-hundredth of a
share of Preferred Stock set forth therein (the "Purchase Price"), but the
number of such one one-hundredths of a share of Preferred Stock and the
Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of such Acquiring Person, (ii) a
transferee of an Acquiring Person or an Affiliate or Associate of such
Acquiring Person who becomes a transferee after the Acquiring Person becomes
such or (iii) a transferee of an Acquiring Person or an Affiliate or Associate
of such Acquiring Person who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
Board of Directors of the Company has determined is part of a plan, arrangement
or understanding which has as a primary purpose or effect avoidance of Section
11(a)(ii), and any Rights Certificate issued pursuant to Section 6 or Section
11 hereof upon transfer, exchange, replacement or adjustment of any other
Rights Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who is, was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby are or may become void
in the circumstances specified in Section 11(a)(ii) of such Rights
Agreement.
The Company shall instruct the Rights Agent in writing of the Rights
Certificates which should be so legended and shall supply the Rights Agent with
such legended Rights Certificates.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. The Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President, any of its Vice Presidents or its Treasurer, either
manually or by facsimile signature, shall have affixed thereto the Company's
seal or a facsimile thereof attested by the Secretary or any of its Assistant
Secretaries, either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by an authorized signatory of the Rights Agent
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have executed any of the Rights
9
<PAGE> 13
Certificates or who shall have attested the Company's seal thereon shall cease
to be such officer of the Company before countersignature by an authorized
signatory of the Rights Agent and issuance and delivery by the Company, such
Rights Certificates, nevertheless, may be countersigned by the Rights Agent and
issued and delivered by the Company with the same force and effect as though
the person who executed such Rights Certificates or who attested the Company's
seal thereon had not ceased to be such officer of the Company; and any Rights
Certificate may be executed on behalf of the Company and the Company's seal may
be attested by any person who, at the actual date of such execution or
attestation, shall be a proper officer of the Company, although at the date of
the execution of this Rights Agreement such person was not such an officer.
After the Distribution Date, the Rights Agent shall keep or cause to
be kept, at its principal office, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each Rights Certificate and the date of each
Rights Certificate.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
RIGHTS CERTIFICATES: MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
Subject to the provisions of Section 4(b) and Section 14, at any time after the
Close of Business on the Distribution Date, and at or prior to the Close of
Business on the earlier of the Redemption Date and the Final Expiration Date,
any Rights Certificate or Rights Certificates (other than Rights Certificates
representing Rights which shall have become void pursuant to Section 11(a)(ii)
or which have been exchanged pursuant to Section 24) may be transferred, split
up, combined or exchanged for one or more Rights Certificates, entitling the
registered holder to purchase the same number of one one-hundredths of a share
of Preferred Stock as the Rights Certificate or Rights Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates shall make such request in a writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged, with the Form of Assignment and
Certification of Status properly executed, along with a signature guarantee and
such other and further documentation as the Rights Agent may reasonably
request, at the designated office of the Rights Agent. Thereupon the Company
shall prepare and execute and the Rights Agent shall countersign and deliver to
the person entitled thereto one or more Rights Certificates as so requested.
The Company may require payment by the holders of Rights Certificates of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights Certificate,
10
<PAGE> 14
and, in the case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and, at the Company's request, reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, along with a signature guarantee and such other and
further documentation as the Rights Agent may reasonably request, the Company
shall prepare and execute, and the Rights Agent shall countersign and deliver
to the registered holder in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated, a new Rights Certificate of like tenor.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE
OF RIGHTS. (a) Subject to Section 11(a)(ii), the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including, without limitation, the restrictions on
exercisability set forth in Section 9, Section 11(a)(iii) and Section 23(a)),
in whole or in part, at any time after the Distribution Date, upon surrender of
such Rights Certificate, with the Form of Election to Purchase and
Certification of Status on the reverse side thereof duly executed, to the
Rights Agent at the designated office of the Rights Agent, along with a
signature guarantee and such other and further documentation as the Rights
Agent may reasonably request, together with payment of the Purchase Price for
each one one-hundredth of a share of Preferred Stock (or such other securities,
cash or assets, as the case may be) as to which the Rights are then being
exercised, at or prior to the earliest of (i) the Close of Business on May 31,
2006 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 (the "Redemption Date") and (iii) the time
at which such Rights are exchanged as provided in Section 24.
(b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock upon the exercise of a Right shall initially be $45.00, shall
be subject to adjustment from time to time as provided in Sections 11 and 13
and shall be payable in lawful money of the United States of America in
accordance with subsection (c) of this Section 7.
(c) Upon receipt of a Rights Certificate representing then
exercisable Rights, with the Form of Election to Purchase and Certification of
Status on the reverse side thereof duly executed, accompanied by payment of the
Purchase Price for the shares of Preferred Stock (or such other securities,
cash or assets, as the case may be) to be purchased and an amount equal to any
applicable transfer tax (as determined by the Rights Agent) required to be paid
by the holder of such Rights Certificate in accordance with Section 9 by
certified or cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i) requisition from any
transfer agent of the shares of Preferred Stock certificates for the number of
shares of Preferred Stock to be purchased, the Company hereby irrevocably
authorizing any such transfer agent to comply with all such requests, or
otherwise requisition or obtain from the appropriate Person or Persons such
other securities, cash
11
<PAGE> 15
or assets, as the case may be, the Company hereby irrevocably authorizing any
such request, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of the issuance of fractional shares in accordance with
Section 14, (iii) after receipt of such certificates, other securities or
assets cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such registered holder, and (iv) after receipt, deliver such cash
to or upon the order of the registered holder of such Rights Certificate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be prepared and executed by
the Company and countersigned and delivered by the Rights Agent to the
registered holder of such Rights Certificate or to his duly authorized assigns,
subject to the provisions of Section 14.
(e) Notwithstanding subsection (a) of this Section 7, a holder of
a Right may exercise such Right after the Distribution Date but prior to the
receipt of the associated Rights Certificate by so notifying the Rights Agent
in writing and furnishing to the Rights Agent such information and evidence as
to such election as the Rights Agent may reasonably request; provided, however,
that the Rights Agent shall not be required to take any of the actions
specified in subsection (c) of this Section 7 until such holder has satisfied
the requirements specified therein.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to any Rights or Rights Certificate upon the purported
transfer or exercise thereof unless the registered holder thereof shall have
(i) completed and signed the Certification of Status following the Form of
Election to Purchase or the Form of Assignment set forth on the reverse side of
the Rights Certificate surrendered for such exercise or assignment and (ii)
provided such additional evidence as to the identity of the Beneficial Owner
(or former Beneficial Owner) thereof or the Affiliates or Associates thereof as
the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form or, if surrendered to the Rights Agent, shall be cancelled by
it; and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by this Agreement. The Company shall deliver to the Rights
Agent for cancellation, and the Rights Agent shall cancel, any other Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof.
12
<PAGE> 16
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED STOCK. (a)
The Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following an Adjustment Event, shares of Common Stock or other securities), or
any authorized and issued shares of Preferred Stock (and, following an
Adjustment Event, shares of Common Stock or other securities) held in its
treasury, the number of shares of Preferred Stock (and, following an Adjustment
Event, shares of Common Stock or other securities) required to permit the
exercise in full of all outstanding Rights.
(b) The Company covenants and agrees that it will take all such
action as may be necessary to insure that all shares of Preferred Stock (and,
following an Adjustment Event, shares of Common Stock or other securities)
delivered upon exercise of the Rights shall, at the time of delivery of the
certificates for such shares of Preferred Stock, Common Stock or other
securities upon payment of the Purchase Price therefor, be duly and validly
authorized and issued and fully paid and nonassessable.
(c) So long as the shares of Preferred Stock (and, following an
Adjustment Event, shares of Common Stock or other securities) issuable upon the
exercise of the Rights are listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after the Distribution
Date, all shares of Preferred Stock (and, following an Adjustment Event, shares
of Common Stock or other securities) reserved for such issuance to be listed on
such exchange upon official notice of issuance.
(d) The Company shall use its best efforts, as soon as practicable
following the first occurrence of an Adjustment Event, to (i) file a
registration statement under the Securities Act of 1933, as amended (the
"Act"), with respect to the securities purchasable upon exercise of the Rights
(and, if legally required, the Rights themselves) on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the expiration of the Rights. The Company will also take such action as
may be appropriate under the blue sky laws of the various states. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) days,
the exercisability of the Rights in order to prepare and file such registration
statement or in order to comply with such blue sky laws. Upon any such
suspension, the Company shall issue a public announcement, and shall give
simultaneous written notice to the Rights Agent, stating that the
exercisability of the Rights has been temporarily suspended. Notwithstanding
any provision of this Rights Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction, unless the requisite qualification in such
jurisdiction shall have been obtained, or an exemption therefrom shall be
available and until any necessary registration statement has been declared
effective. In the absence of actual written notice from the Company, the Rights
Agent may
13
<PAGE> 17
assume that any Right exercised is permitted to be exercised under applicable
law and shall have no liability for acting in reliance upon such assumption.
(e) The Company further covenants and agrees that, subject to
Section 6, it will pay when due and payable any and all federal and state
original issue or transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Rights Certificates or of any shares of
Preferred Stock (or Common Stock or other securities) issued upon the exercise
of the Rights. The Company shall not, however, be required to pay any transfer
tax which may be payable in respect of any transfer or delivery of any Rights
Certificate to a person other than, or the issuance of certificates for shares
of Preferred Stock (or Common Stock or other securities) upon exercise of the
Rights represented thereby in a name other than that of, the registered holder
of such Rights Certificate or to issue or deliver any certificates for shares
of Preferred Stock (or Common Stock or other securities) upon such exercise
until any such tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's reasonable satisfaction that no such tax is
due.
SECTION 10. RECORD DATE OF PREFERRED STOCK OWNERSHIP. Each
Person in whose name any certificate for shares of Preferred Stock (or Common
Stock or other securities) is issued upon the exercise of any Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Preferred Stock (or Common Stock or other securities) represented thereby on,
and such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered to the Rights Agent with proper
payment of the Purchase Price and all applicable transfer taxes; provided,
however, that if the date of such surrender and payment shall be a date upon
which the transfer books of the Company for the Preferred Stock (or Common
Stock or other securities) are closed, such Person shall be deemed to have
become the record holder of such shares of Preferred Stock (or Common Stock or
other securities) on, and such certificate shall be dated, the next succeeding
Business Day on which the transfer books of the Company for the Preferred Stock
(or Common Stock or securities) are open.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event that the Company shall at any time after the
date of this Agreement (A) declare a dividend on its Preferred Stock payable in
shares of Preferred Stock, (B) subdivide its outstanding shares of Preferred
Stock, (C) combine its outstanding shares of Preferred Stock into a smaller
number of shares of Preferred Stock or (D) issue any shares of any class in a
reclassification of its Preferred Stock (including any such reclassification in
connection with a combination or merger in
14
<PAGE> 18
which the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such dividend or the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of any class issuable upon exercise of the Rights at such time, shall be
proportionately adjusted so that the registered holder of any Right exercised
after such time shall be entitled to receive the aggregate number and kind of
shares of any class which, if such Right had been exercised immediately prior
to such time and at a time when the Preferred Stock transfer books of the
Company were open, such holder would have owned upon such exercise and after
giving effect to such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of the
Company issuable upon the exercise thereof. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section (11)(a)(ii),
the adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii).
(ii) Subject to Section 24, in the event that any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any entity holding
shares of Common Stock of the Company for or pursuant to the terms of any such
plan) shall become the Beneficial Owner of 15% or more of such shares of Common
Stock then outstanding (such occurrence being deemed to be a "Section 11(a)(ii)
Event"), then proper provision shall be made so that each holder of a Right,
except as otherwise provided in this paragraph (ii), shall thereafter have a
right to receive, upon the exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-hundredths of a
share of Preferred Stock for which a Right is then exercisable, in accordance
with the terms of this Agreement, and in lieu of shares of Preferred Stock,
such number of shares of Common Stock of the Company determined by (x)
multiplying such current Purchase Price by the number of one one-hundredths of
a share of Preferred Stock for which a Right is then exercisable and (y)
dividing the product so obtained by 50% of the then Current Per Share Market
Price of the shares of Common Stock of the Company, determined as provided in
Section 11(d), on the fifth day after the date of the occurrence or the date of
first public announcement, whichever shall be less, of the Section 11(a)(ii)
Event requiring such adjustment (the number of shares of Common Stock so
determined being hereinafter called the "Adjustment Shares"); provided,
however, that if the Section 11(a)(ii) Event otherwise requiring such
adjustment is also subject to the provisions of Section 13, then only the
provisions of Section 13 shall apply and no adjustment shall be made pursuant
to this Section 11(a)(ii).
From and after the first occurrence of a Section 11(a)(ii) Event, any
Rights that are or were acquired or Beneficially Owned by (i) an Acquiring
Person or any Affiliate or Associate of such Acquiring Person, (ii) a
transferee of an Acquiring Person or any
15
<PAGE> 19
Affiliate or Associate of such Acquiring Person who becomes a transferee after
such Acquiring Person becomes such or (iii) a transferee of an Acquiring Person
or any Affiliate or Associate of such Acquiring Person who becomes a transferee
prior to or concurrently with such Acquiring Person becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 11(a)(ii) shall be
void, and any holder of such Rights shall thereafter have no right to exercise
such Rights under any provision of this Agreement. No Rights Certificate shall
be issued pursuant to Section 3 that represents Rights Beneficially Owned by an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or to any Affiliate or Associate thereof; no Rights Certificate shall be issued
at any time upon the transfer of any Rights to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or to any Affiliate or
Associate thereof or to any nominee of such Acquiring Person, Affiliate or
Associate; no Rights Certificate shall be issued at any time upon the transfer
of any Rights to any transferee whose Rights would be void pursuant to the
preceding sentence; and any Rights Certificate delivered to the Rights Agent
for transfer to any Person whose Rights would be void pursuant to the preceding
sentence shall be cancelled.
(iii) In the event that the number of shares of Common
Stock authorized by the Company's Certificate of Incorporation, as amended (the
"Certificate"), which are not outstanding or reserved for issuance for purposes
other than the exercise of the Rights is insufficient to permit the exercise in
full of the Rights in accordance with paragraph (ii) of this subsection (a),
the Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of each Right (the "Current Value") over (2)
the Purchase Price (such excess being hereinafter called the "Spread") and (B)
with respect to each Right, make adequate provision to substitute for the
Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2)
a reduction in such Purchase Price, (3) Common Stock or other equity securities
of the Company having the same rights, privileges and preferences as the Common
Stock (hereinafter called "Equivalent Common Stock"), (4) debt securities of
the Company, (5) other assets or (6) any combination of the foregoing having an
aggregate value equal to the Current Value, such aggregate value to be
determined by the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by such Board of
Directors; provided, however, that if the Company shall not have made adequate
provision to deliver aggregate value pursuant to clause (B) above within 30
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right to redeem the Rights
pursuant to Section 23(a) shall expire (the later of such events being
hereinafter called the "Section 11(a)(ii)
16
<PAGE> 20
Adjustment Date"), then the Company shall be obligated to deliver, upon the
surrender for exercise of each Right and without requiring payment of such
Purchase Price, shares of Common Stock (to the extent available) and then, if
and to the extent necessary, cash, which shares of Common Stock and/or cash
have an aggregate value equal to the Spread. If the Board of Directors of the
Company shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon
exercise in full of the Rights, the 30-day period specified in the preceding
sentence may be extended to the extent necessary, but in no event more than 90
days after the Section 11(a)(ii) Adjustment Date, in order that the Company may
seek shareholder approval for the authorization of such additional shares of
Common Stock (such 30-day period, as it may be extended, being hereinafter
called the "Substitution Period"). To the extent that the Company shall
determine that action is required to be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (A) shall provide,
subject to Section 11(a)(ii), that such action shall apply uniformly to all
outstanding Rights and (B) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide upon the appropriate form of distribution to
be made pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement of the time after which such suspension shall
no longer be in effect. For purposes of this Section 11(a)(iii), the value of
the Adjustment Shares shall be calculated upon the basis of the Current Per
Share Market Price of the shares of Common Stock of the Company, determined as
provided in Section 11(d), on the Section 11(a)(ii) Adjustment Date, and the
value of any share of Equivalent Common Stock shall be deemed to be equal to
such Current Per Share Market Price.
(b) In the event that the Company shall fix a record date for the
issuance of options, warrants or rights to all holders of its Preferred Stock
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase shares of Preferred Stock (or equity
securities of the Company having the same rights, privileges and preferences as
the Preferred Stock, the "Equivalent Preferred Stock") or securities
convertible into or exchangeable for Preferred Stock or Equivalent Preferred
Stock at a price per share of Preferred Stock or per Equivalent Preferred Stock
(or having a conversion or exchange price per share, in the case of securities
convertible into or exchangeable for Preferred Stock or Equivalent Preferred
Stock) less than the then Current Per Share Market Price of such shares of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the
17
<PAGE> 21
aggregate offering price of the convertible or exchangeable securities so to be
offered) would purchase at such Current Per Share Market Price, and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (or into or
for which the convertible or exchangeable securities so to be offered are
initially convertible or exchangeable); provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of the Company issuable upon the exercise
thereof. In case such subscription price may be paid in a consideration part
or all of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent. Preferred Stock
owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such
options, warrants, rights or securities are not so issued, the Purchase Price
shall be adjusted to the Purchase Price which would have been in effect if such
record date had not been fixed.
(c) In the event that the Company shall fix a record date for the
making of any distribution to all holders of its Preferred Stock (including any
such distribution made in connection with a combination or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend at a rate
not in excess of 125% of the rate of the last regular quarterly cash dividend
theretofore paid or a dividend payable in such shares of Preferred Stock) or
options, warrants or rights (excluding those referred to in Section 11(b)), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the then Current Per Share
Market Price of such Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent) of the evidences of
indebtedness or assets so to be distributed, or of such options, warrants or
rights, properly attributable to one share of Preferred Stock and the
denominator of which shall be such Current Per Share Market Price; provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of the Company
issuable upon the exercise thereof. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such distribution
is not so made, the Purchase Price shall be adjusted to the Purchase Price
which would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii), the "Current Per Share
Market
18
<PAGE> 22
Price" of any security, including the shares of Common Stock of the Company
(hereinafter in this Section 11(d)(i) called a "Security"), on any date shall
be deemed to be the average of the daily closing prices per share of such
Security for the 30 consecutive Trading Days immediately prior to such date
and, for the purpose of computations made pursuant to Section 11(a)(iii), the
"Current Per Share Market Price" of any Security on any date shall be deemed to
be the average of the daily closing prices per share of such Security for the
10 consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Per Share Market Price of any Security is
determined during a period commencing with the announcement by the issuer of
such Security of (A) a dividend or distribution on such Security payable in
such Security or securities convertible into or exchangeable for such Security,
or (B) any subdivision, combination or reclassification of such Security, and
ending prior to the expiration of such 30 Trading Days or 10 Trading Days, as
the case may be, after the ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination or reclassification, then,
and in each such case, the Current Per Share Market Price of such Security
shall be appropriately adjusted to reflect the effect of such dividend,
distribution, subdivision, combination or reclassification. The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale shall take place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on a national exchange or, if the Security is not listed or admitted to
trading on a national exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use or, if on any such day the Security is not quoted by any such
organization, the average of the closing bid and asked prices, as furnished by
a professional market maker making a market in the Security selected by the
Board of Directors of the Company. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if
the Security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
Current Per Share Market Price of the Preferred Stock shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Stock is not publicly traded, the Current Per Share Market Price of the
Preferred Stock shall be conclusively deemed to be the Current Per Share Market
Price of the Common Stock as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one
19
<PAGE> 23
hundred. If neither the Common Stock nor the Preferred Stock of the Company is
publicly traded, the "Current Per Share Market Price" thereof shall mean the
fair value per share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of this
subsection (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one one-millionth of a
share of Preferred Stock or one ten-thousandth of any other share or security,
as the case may be. Notwithstanding the first sentence of this subsection (e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the event or transaction which
requires such adjustment and (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or Section 13(a) the holder of any Right thereafter exercised shall become
entitled to receive any shares of any class of the Company other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise
of any Right shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Preferred Stock contained in subsections (a), (b), (c), (e), (g), (h), (i),
(j), (k), (m) and (n) of this Section 11, and the provisions of Sections 7, 9,
10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to
any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised the election provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations required to be made by subsection (b) or (c) of this Section 11,
each Right outstanding immediately prior to the making of such Purchase Price
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, the number of one one-hundredth of a share of Preferred Stock
(calculated to the nearest one onemillionth) determined by (i) multiplying the
number of one one-hundredths of a share of Preferred Stock purchasable upon
exercise of such Right immediately prior to such Purchase Price adjustment by
the Purchase Price in effect immediately prior to such Purchase Price
adjustment and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such Purchase Price adjustment.
20
<PAGE> 24
(i) The Company may elect, on or after the date of any adjustment
of the Purchase Price, to adjust the number of Rights outstanding, in
substitution for any adjustment in the number of one one-hundredths of a share
of Preferred Stock purchasable upon the exercise of a Right. Each Right
outstanding after such adjustment in the number of Rights shall be exercisable
for the same number of one one-hundredths of a share of Preferred Stock as a
Right was exercisable for immediately prior to such adjustment. Each Right
held of record prior to such adjustment shall become the number of Rights
(calculated to the nearest one ten-thousandth) determined by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment and, if
known at such time, the amount of the adjustment to be made. Such record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least 10 days
after the date of such public announcement. If the Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
subsection (i), the Company shall, as promptly as practicable, but subject to
Section 11(a)(ii), cause to be distributed to each registered holder of the
Rights Certificates on such record date Rights Certificates evidencing, subject
to Section 14, the additional Rights to which such registered holder shall be
entitled as a result of such adjustment or, at the option of the Company, shall
cause to be distributed to each such registered holder, in substitution and
replacement for the Rights Certificates held by such registered holder prior to
the date of adjustment, and upon surrender thereof, if required by the Company,
new Rights Certificates evidencing all the Rights to which such registered
holder shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be executed and countersigned in the manner provided for
herein and shall be registered in the names of the registered holders of the
Rights Certificates on the record date specified in the aforesaid public
announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-hundredths of a share of Preferred Stock which were expressed in the Rights
Certificates originally issued hereunder.
(k) Before taking any action which would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the shares of Preferred Stock issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Preferred Stock at such adjusted
Purchase Price.
21
<PAGE> 25
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
of the Preferred Stock and other shares or securities of the Company, if any,
issuable upon such exercise in excess of the shares of Preferred Stock and
other shares or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares of Common Stock and other shares or securities, if any, upon
the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to the adjustments expressly required by this Section 11, as and to
the extent that the Company, in its sole discretion, shall determine to be
advisable in order that any combination or subdivision of its shares of
Preferred Stock, or any issuance of its shares of Preferred Stock solely for
cash at less than the current market price thereof, any issuance solely for
cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, any dividend on
its shares of Preferred Stock payable in shares of Preferred Stock or any
issuance of options, warrants or rights subject to Section 11(b) hereafter made
by the Company to the holders of its shares of Preferred Stock, shall not be
taxable to such stockholders.
(n) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the shares of Common Stock payable in shares of Common Stock or
(ii) effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in any
such case (i) the number of one one-hundredths of a share of Preferred Stock
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-hundredths of a share of
Preferred Stock so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (ii) each
share of Common Stock outstanding immediately after such event shall have
issued with respect to it that number of Rights which each share of Common
Stock outstanding immediately prior to such event had issued with respect to
it. The adjustments provided for in this subsection (n) shall be made
successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected. If such an event occurs
which would require an adjustment under Section
22
<PAGE> 26
11(a)(ii) and this subsection (n), the adjustment provided for in this
subsection (n) shall be in addition to and prior to any adjustment required
pursuant to Section 11(a)(ii).
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever any adjustment shall be required by Section 11 or 13, the
Company shall promptly (i) prepare a certificate setting forth such adjustment
and a brief statement of the facts requiring such adjustment, (b) file with the
Rights Agent and with each transfer agent for the Common Stock or the Preferred
Stock of the Company a copy of such certificate and (c) mail a brief summary
thereof to each registered holder of a Rights Certificate in accordance with
Section 25.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS
OR EARNING POWER. (a) In the event that, on or after the Share Acquisition
Date, directly or indirectly: (i) the Company shall consolidate with, or merge
with and into, any other Person and the Company shall not be the continuing or
surviving corporation, (ii) any Person shall consolidate with the Company, or
merge with and into the Company, and the Company shall be the continuing or
surviving corporation and, in connection with such consolidation or merger, all
or part of the outstanding shares of Common Stock of the Company shall be
changed into or exchanged for shares or other securities of any other Person
(or the Company), cash and/or other property or (iii) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in a transaction or a series of transactions other than in the
ordinary course of business, assets or earning power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons other than the Company or one or more of its
wholly-owned Subsidiaries, then, and in each such case, proper provision shall
be made so that (w) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof
at a price equal to the then current Purchase Price multiplied by the number of
one one-hundredths of a share of Preferred Stock for which a Right is then
exercisable in accordance with the terms of this Agreement and in lieu of
shares of Preferred Stock, the number of freely tradable shares of Common Stock
of the Principal Party, free and clear of all liens, encumbrances or other
adverse claims, determined by (A) multiplying such current Purchase Price by
the number of one one-hundredths of a share of Preferred Stock for which a
Right is then exercisable and (B) dividing the product so obtained by 50% of
the then Current Per Share Market Price of the shares of Common Stock of such
Principal Party, determined as provided in Section 11(d), on the date of
consummation of such consolidation, merger, sale or transfer; (x) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company under this Agreement; (y) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 shall apply to such Principal Party; and (z) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its shares of Common Stock in accordance
with Section 9) in connection
23
<PAGE> 27
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably possible, in relation
to the shares of Common Stock thereafter deliverable upon the exercise of the
Rights. The Company shall not consummate any such consolidation, merger, sale
or transfer unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement so
providing. The Company shall not enter into any transaction of the kind set
forth in this subsection (a) if at the time of the consummation of such
transaction there are any options, warrants, rights, conversion or exchange
provisions or securities outstanding or any agreements or arrangements in
effect which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The provisions of this Section 13 shall similarly apply to successive
mergers, consolidations, sales or other transfers. If, in the case of a
transaction of the kind described in clause (iii) of the first sentence of this
subsection (a), the Person or Persons to whom assets or earning power are sold
or otherwise transferred are individuals, then the preceding sentences of this
subsection (a) shall be inapplicable, and the Company shall require as a
condition to such sale or transfer that such Person or Persons pay to each
holder of a Rights Certificate, upon its surrender to the Rights Agent and in
exchange therefor (without requiring any payment by such holder), cash in the
amount determined by multiplying the then current Purchase Price by the number
of one one-hundredths of a share of Preferred Stock for which a Right is then
exercisable.
(b) "Principal Party" shall mean, in the case of any transaction
of the kind described in clause (i) or (ii) of the first sentence of Section
13(a), the Person which is the issuer of any securities into which shares of
Common Stock of the Company are converted in such transaction or, if there
shall be more than one such issuer, the issuer having shares of Common Stock
with the greatest aggregate market value; or if no securities are so issued,
the Person which is the other party to such transaction or, if there is more
than one such Person, the Person having shares of Common Stock with the
greatest aggregate market value; and in the case of any transaction of the kind
described in clause (iii) of the first sentence of Section 13(a), the Person
which is the party receiving the greatest portion of the assets or earning
power transferred pursuant to such transaction or transactions; provided,
however, that in any such case (i) if the shares of Common Stock of such Person
shall not at the time of the consummation of such transaction have been
continuously registered under Section 12 of the Exchange Act during the
preceding 12-month period, and such Person shall be a direct or indirect
Subsidiary of another Person the shares of Common Stock of which shall have
been so registered, "Principal Party" shall mean such other Person; and (ii) if
such Person shall be a Subsidiary, directly or indirectly, of more than one
Person, the shares of Common Stock of two or more of which shall have been so
registered, "Principal Party" shall mean whichever of such Persons is the
issuer of shares of Common Stock having the greatest aggregate market value.
24
<PAGE> 28
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have sufficient
Common Stock authorized to permit the full exercise of the Rights and prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing for the terms set forth
in Sections 13(a) and (b) above and further providing that, as soon as
practicable after the date of any consolidation, merger or sale of assets
mentioned in Section 13(a) above, the Principal Party will:
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times meeting
the requirements of the Act) until the Final Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
In the event that one of the transactions described in Section 13(a)
hereof shall occur at any time after a Section 11(a)(ii) Event, the Rights
which have not theretofore been exercised shall thereafter become exercisable
in the manner described in Section 13(a).
(d) In no event shall the Rights Agent have any liability in
respect of any such Principal Party transactions, including, without
limitation, the propriety thereof. The Rights Agent may rely and be fully
protected in relying upon a certificate of the Company stating that the
provisions of this Section 13 have been fulfilled. Notwithstanding anything in
this Agreement to the contrary, the prior written consent of the Rights Agent,
which consent shall not be unreasonably withheld, must be obtained in
connection with any supplemental agreement which alters the rights or duties of
the Rights Agent.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The
Company shall not be required to issue fractional Rights or to distribute
Rights Certificates which evidence fractional Rights. In lieu of fractional
Rights, there shall be paid to the registered holders of the Rights
Certificates with respect to which fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of one Right. For the purposes of this Section 14(a), the current market
value of one Right shall be the closing price per Right for the Trading Day
immediately prior to the date on which fractional Rights would have been
otherwise issuable. The closing price for any Trading Day shall be the last
sale price, regular way, or, in case no such sale shall take place on such
Trading Day, the average of the closing bid and asked prices as reported in the
principal consolidated transaction
25
<PAGE> 29
reporting system with respect to securities listed or admitted to trading on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such Trading Day the Rights are not quoted by any such organization, the
average of the closing bid and asked prices, as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors
of the Company. If on any such Trading Day no such market maker is making a
market in the Rights, the current market value of one Right on such Trading Day
shall be the fair value thereof as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent.
(b) The Company shall not be required to issue fractional shares
of Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock
that are not integral multiples of one one-hundredth of a share of Preferred
Stock, the Company shall pay to the registered holders of the Rights
Certificates at the time Rights represented thereby are exercised, as herein
provided, an amount in cash equal to the same fraction of the current market
value per share of Preferred Stock. For the purposes of this Section 14(b),
the Current Market Value Per Share of Preferred Stock shall be the closing
price per share of Preferred Stock (determined as provided in Section 11(d))
for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of an Adjustment Event, the Company
shall not be required to issued fractional shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company shall
pay to the registered holders of the Rights Certificates at the time Rights
represented thereby are exercised, as herein provided, an amount in cash equal
to the same fraction of the Current Market Value Per Share of Common Stock.
For the purposes of this Section 14(c), the Current Market Value per Share of
Common Stock shall be the closing price per share of Common Stock (determined
as provided in Section 11(d)) for the Trading Day immediately prior to the date
of such exercise.
(d) Each holder of a Right, by accepting the same, expressly
waives such holder's right to receive any fractional Rights or any fractional
shares of Common Stock or Preferred Stock upon exercise of such Right (except
as provided above).
26
<PAGE> 30
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, excepting the specific rights of action given to the Rights
Agent under Section 18, are vested in the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
the shares of Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the shares of Common
Stock), without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the shares of Common
Stock), may, on such registered holder's own behalf and for such registered
holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
such registered holder's right to exercise its Rights in the manner provided in
such Rights Certificate and in this Agreement. Without limiting the generality
of the foregoing or any remedies available to the holders of the Rights, it is
specifically acknowledged that the registered holders of the Rights would not
have an adequate remedy at law for any breach of this Agreement and will be
entitled to specific performance of the obligations under, and injunctive
relief against any actual or threatened violations of the obligations of any
Person subject to, this Agreement. Each holder of the Rights shall be entitled
to recover the reasonable costs and expenses, including attorneys' fees,
incurred by such holder in any action-to enforce the provisions of this
Agreement.
SECTION 16. AGREEMENT OF HOLDERS OF THE RIGHTS. Each holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(i) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Stock of the
Company;
(ii) after the Distribution Date, the Rights Certificates
will be transferable on the registry books of the Rights Agent only if
surrendered at the designated office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
on the reverse side thereof fully executed, along with a signature guarantee
and such other and further documentation as the Rights Agent may reasonably
request;
(iii) subject to Sections 6 and 11(a)(ii), the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
represented thereby (notwithstanding any notations of ownership or other
writing on such Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
27
<PAGE> 31
(iv) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority prohibiting or otherwise
restraining performance of such obligation; provided that the Company must use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER.
No holder, as such, of any Rights Certificate shall be entitled to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
or shall be deemed for any other purpose to be the holder of shares of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby; nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a shareholder
of the Company or any right to vote for the election of directors or upon any
other matter submitted to shareholders at any meeting thereof, to give or
withhold consent to any corporate action, to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 25) or to
receive dividends, subscription rights or other distributions, until the Right
or Rights represented by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. The Company agrees to
pay to the Rights Agent such compensation as shall be agreed to in writing
between the Company and the Rights Agent for all services rendered by it
hereunder and, from time to time, on request of the Rights Agent, its
reasonable expenses and counsel fees and expenses incurred in the acceptance
and administration of this Agreement and the performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
gross negligence, bad faith or willful misconduct on its part, for anything
done or omitted by it in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against any claim
of liability arising therefrom, directly or indirectly. The provisions of this
Section 18(a) shall survive the expiration of the Rights and the termination of
this Agreement.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of, any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Preferred Stock or Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
28
<PAGE> 32
consent, certificate, statement or other paper or document believed by it to be
genuine and to be signed and executed by the proper Person or Persons, or in
reliance upon the advice of counsel as set forth in Section 20.
SECTION 19. MERGER OR CONSOLIDATION OF THE RIGHTS AGENT. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for
appointment as successor Rights Agent under the provisions of Section 21. In
case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement any of the Rights Certificates shall have been
countersigned but not delivered, such successor Rights Agent may adopt the
countersignature of its predecessor Rights Agent and deliver the Rights
Certificates so countersigned; and in case at such time any of the Rights
Certificates shall not have been countersigned, such successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full effect provided therein and
in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver the Rights Certificates so countersigned; and in case at such
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full effect provided therein and in this Agreement.
SECTION 20. DUTIES OF THE RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations expressly imposed by this Agreement (and
no implied duties or obligations shall be read into this Agreement against the
Rights Agent) upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by accepting the same, shall be
bound:
(a) The Rights Agent may consult with legal counsel of its
selection (who may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion.
29
<PAGE> 33
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the President, any Vice President, the Treasurer or the Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 11(a)(ii)), for any
adjustment or change in the terms of the Rights (including any adjustment or
change in the Purchase Price or in the number or kind of shares or other
securities or property issuable upon the exercise thereof) provided for in
Section 3, 11, 13, 23 or 24 or for ascertaining the existence of facts which
would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice that
such change or adjustment is required); nor shall it by any act hereunder be
deemed to make any representation-or warranty as to the authorization or
reservation of any shares of Preferred Stock or Common Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Preferred Stock or Common Stock will, when issued, be validly
authorized and issued and fully paid and nonassessable, nor shall the Rights
Agent be responsible for the legality of the terms hereof in its capacity as an
administrative agent.
(f) The Company agrees that it will inform the Rights Agent
promptly upon the Company's determination that a Person has become an Acquiring
Person, and the Rights Agent will not be responsible for determining whether a
Person has become an Acquiring Person prior to such notification, except as
such status may be indicated in
30
<PAGE> 34
the Form of Certification of Status accompanying a Rights Certificate submitted
to the Rights Agent. The Company further agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the hoard, the President, any Vice President, the
Treasurer or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties; and the Rights Agent
shall not be liable for any action taken or omitted by it in good faith in
accordance with the written instructions of any such officer or for any delay
in acting while waiting for such instructions. Any application by the Rights
Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted
by the Rights Agent under this Agreement and the date on and/or after which
such action shall be taken or such omission shall be effective. The Rights
Agent shall not be liable for any action taken by, or omission of, the Rights
Agent in accordance with a proposal included in such application on or after
the date specified in such application which date shall not be less than five
Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in the Rights, the Common
Stock or any other securities of the Company or become pecuniarily interested
in any transaction in which the Company may be interested, or contract with or
lend money to the Company, and may otherwise act as fully and freely as though
it were not the Rights Agent under this Agreement; and nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any of its duties hereunder either
directly or by or through its attorneys or agents, and the Rights Agent shall
not be answerable or accountable for any act, default, neglect or misconduct of
any such attorney or agent or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided the Rights Agent exercised
reasonable care in the selection of such attorney or agent.
31
<PAGE> 35
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the Form of Certification of Status
attached to the Form of Election to Purchase or the Form of Assignment, as the
case may be, has either not been completed or indicates an affirmative response
to Question 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to the requested exercise or transfer without first
consulting with the Company.
(k) No provision of this Agreement shall require the Rights Agent
to expand or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(l) In addition to the foregoing, the Rights Agent shall be
protected and shall incur no liability for, or in respect of, any action taken
or omitted by it in connection with its administration of this Agreement if
such acts or omissions are in reliance upon (i) the proper execution of the
Form of Certification of Status attached to the Form of Election to Purchase or
the Form of Assignment unless the Rights Agent shall have actual knowledge
that, as executed, such certification is untrue, or (ii) the non-execution of
such certification, including, without limitation, any refusal to honor any
otherwise permissible assignment or election by reason of such non-execution.
(m) The Company agrees to give the Rights Agent prompt written
notice of any event or ownership which would prohibit the exercise or transfer
of the Rights Certificates.
SECTION 21. CHANGE OF THE RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' prior notice mailed to the Company. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' prior
notice mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock and Preferred Stock by
registered or certified mail, postage prepaid, and to each registered holder of
the Rights Certificates by first-class mail, postage prepaid. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor Rights Agent. If the Company shall fail
to make such appointment within 30 days after giving notice of such removal or
after receiving notice of such resignation or incapacity either from the
resigning or incapacitated Rights Agent or from the registered holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then the Rights Agent or the registered holder
of any Rights Certificate may apply to any court of competent jurisdiction for
the appointment of a successor Rights Agent. Any successor Rights Agent,
whether appointed by the Company or by such a court, shall be a corporation
organized and doing business under the laws of the United States of America, be
in good standing under the laws of the jurisdiction
32
<PAGE> 36
of its incorporation, be authorized under such laws to exercise corporate trust
or stock transfer powers, be subject to supervision or examination by federal
or state authority and have at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million. After its appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and
Preferred Stock, and mail notice thereof to the registered holders of the
Rights Certificates. Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the appointment of any
successor Rights Agent.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding
any other provision of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing the Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price or in the number or kind of shares
or other securities or property issuable upon the exercise of the Rights in
accordance with the provisions of this Agreement; provided, however, that (i)
no such Rights Certificate shall be issued if, and to the extent that, the
Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or to the
Person to whom such Rights Certificate would be issued and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION. (a) The Board of Directors of the
Company may, at its option, at any time prior to the earlier of (i) the Close
of Business on the 10th Business Day after the Share Acquisition Date and (ii)
the Final Expiration Date, redeem all, but not less than all, of the then
outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter called
the "Redemption Price"); provided, however, that if the Board of Directors of
the Company shall authorize the redemption of the Rights in the circumstances
set forth in clause (i) or (ii) below, then there must be Disinterested
Directors in office and such authorization shall require the concurrence of a
majority of such Disinterested Directors: (i) such authorization occurs on or
after the date a Person becomes an Acquiring Person or (ii) such authorization
occurs on or after the date of a change (resulting from a solicitation of
either proxies or one or more shareholder written consents) in a majority of
the directors in office at the commencement of such solicitation if any Person
who shall be a participant in the
33
<PAGE> 37
solicitation of such proxies or consents has stated (or, if upon the
commencement of any such solicitation, a majority of the Board of Directors of
the Company shall determine in good faith) that such Person (or any of its
Affiliates or Associates) intends to take, or may consider taking, any action
which would result in such Person becoming an Acquiring Person or which would
cause the occurrence of an Adjustment Event. In considering whether to redeem
the Rights, the Board of Directors of the Company may consider (x) the effects
on the Company's employees, suppliers, creditors and customers; (y) the effects
on the communities in which the Company operates; and (z) the long-term and
short-term interests of the Company and its shareholders, including the
possibility that such interests may be best served by the continued
independence of the Company and any other pertinent factors, whether or not
they are enumerated in Article XII of the Articles. The redemption of the
Rights by such Board of Directors may be made effective at such time, on such
basis and with such conditions as such Board of Directors in its sole
discretion may establish. In addition to the right of redemption reserved in
the first sentence of this subsection (a), if there are Disinterested Directors
then in office, such Board of Directors may redeem, with the concurrence of a
majority of such Disinterested Directors, all, but not less than all, of the
then outstanding Rights at the Redemption Price after the occurrence of a Share
Acquisition Date, but prior to the occurrence of any transaction of the kind
described in Section 13(a), if either (i) a Person who is an Acquiring Person
shall have transferred or otherwise disposed of such number of shares of Common
Stock of the Company, in one transaction or a series of transactions not
directly or indirectly involving the Company or any of its Subsidiaries or the
occurrence of any transaction of the kind described in Section 13(a), as shall
result in such Person thereafter being a Beneficial Owner of 10% or less of the
outstanding shares of Common Stock of the Company, and after such transfer or
other disposition there are no other Acquiring Persons, or (ii) in connection
with any transaction of the kind described in Section 13(a) in which all
holders of the shares of Common Stock of the Company are treated the same and
which shall not involve an Acquiring Person, an Affiliate or Associate of an
Acquiring Person, any other Person in which such Acquiring Person, Affiliate or
Associate has any interest or any other Person acting, directly or indirectly,
on behalf of or in association with any such Acquiring Person, Affiliate or
Associate. Notwithstanding any other provision of this Agreement, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii)
Event until such time as the Company's right of redemption hereunder has
expired.
(b) Immediately after any action by the Board of Directors of the
Company directing the redemption of the Rights pursuant to subsection (a) of
this Section 23, notice of which shall be filed with the Rights Agent, and
without any further action and without any notice, the right to exercise the
Rights shall terminate and each registered holder of the Rights shall
thereafter be entitled to receive only the Redemption Price per Right. The
Company shall give prompt public notice of any redemption directed pursuant to
such subsection (a); provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such
34
<PAGE> 38
redemption. Within 10 days after action by such Board of Directors directing
the redemption of the Rights, the Company shall mail a notice of redemption to
all registered holders of the then outstanding Rights at their last addresses
appearing upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock of the Company. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not received by the registered holder to whom
sent; provided, however, that the failure to give, or any defect in, any such
notice shall not affect the validity of any such redemption. Each such notice
of redemption shall state the method by which payment of the Redemption Price
shall be made.
(c) The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock (based on the Current Per Share Market Price of
the shares of Common Stock at the date of redemption) or any other form of
consideration deemed appropriate by the Board of Directors of the Company.
SECTION 24. EXCHANGE. (a) The Board of Directors of the Company
may, at its option, at any time after any Person shall have become an Acquiring
Person, exchange all or any part of the then outstanding and exercisable Rights
(which shall not include Rights which have become void pursuant to the
provisions of Section 11(a)(ii)) for shares of Common Stock of the Company at
an exchange rate of one share of Common Stock per Right, appropriately adjusted
to reflect any transaction of the type specified in clauses (A) through (D),
inclusive, of Section 11(a)(i) but with respect to the Common Stock and Section
11(n) and occurring after the date hereof (such exchange rate being hereinafter
called the "Exchange Rate"); provided, however, that the Board of Directors
shall not be empowered to effect such an exchange at any time after any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any Subsidiary of the Company or any entity holding
shares of Common Stock of the Company for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person, shall have
become the Beneficial Owner of 50% or more of the shares of Common Stock of the
Company then outstanding.
(b) Immediately after any action by the Board of Directors of the
Company directing the exchange of any Rights pursuant to subsection (a) of this
Section 24, notice of which shall be filed with the Rights Agent, and without
any further action and without any notice, the right to exercise such Rights
shall terminate and each registered holder of such Rights shall thereafter be
entitled to receive only the number of shares of Common Stock which shall equal
the number of such Rights held by such registered holder multiplied by the
Exchange Rate. The Company shall give prompt public notice of any exchange
directed pursuant to such subsection (a); provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of
such exchange. Within 10 days after action by such Board of Directors
directing the exchange of such Rights, the Company shall mail a notice of
exchange
35
<PAGE> 39
to all registered holders of such Rights at their last addresses appearing upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the shares of Common Stock of the
Company. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not received by the registered holder to whom sent;
provided, however, that the failure to give, or any defect in, any such notice
shall not affect the validity of any such exchange. Each such notice shall
state the method by which the exchange of shares of Common Stock for Rights
will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro
rata among the registered holders of the Rights based upon the number of Rights
held (excluding Rights which have become void pursuant to the provisions of
Section 11(a)(ii)); and in such case, a new Rights Certificate evidencing the
Rights not being exchanged shall be prepared and executed by the Company and
countersigned and delivered by the Rights Agent to the registered holder of
such Rights, subject to the provisions of Section 14.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Preferred Stock (or Equivalent Preferred
Stock) for shares of Common Stock exchangeable for Rights, at the initial rate
of one one-hundredth of a share of Preferred Stock (or Equivalent Preferred
Stock) for each share of Common Stock, as appropriately adjusted to reflect
adjustments in the voting rights of the Preferred Stock pursuant to the terms
thereof, so that the fraction of a share of Preferred Stock delivered in lieu
of each share of Common Stock shall have the same voting rights as one share of
Common Stock.
(d) In the event that there shall be an insufficient number of shares
of Common Stock or Preferred Stock authorized but unissued or issued and held
in the treasury of the Company to permit an exchange of Rights directed by the
Board of Directors of the Company, the Company shall take all such action as
may be necessary to authorize additional shares of Common Stock or Preferred
Stock for issuance upon such exchange of the Rights. In any such exchange, the
Company may, at its option, substitute shares of Equivalent Common Stock for
some or all of the shares of Common Stock otherwise exchangeable for the
Rights.
(e) The Company shall not be required to issue fractional shares of
Common Stock or Preferred Stock in exchange for Rights or to distribute
certificates which evidence fractional shares of Common Stock or Preferred
Stock. In lieu of fractional shares of Common Stock or Preferred Stock, the
Company shall pay to the registered holders of the Rights with respect to which
such fractional shares of Common Stock or Preferred Stock would otherwise be
issuable an amount in cash equal to the same fraction of the Current Market
Value Per Share of Common Stock or Preferred Stock. For the purposes of this
subsection (e), the Current Market Value Per Share of Common Stock or Preferred
Stock shall be determined as provided in Section 14.
36
<PAGE> 40
SECTION 25. NOTICE TO HOLDERS OF RIGHTS CERTIFICATES OF CERTAIN
EVENTS. (a) In the event that the Company shall propose (i) to pay any
dividend payable in shares of any class to the holders of its Preferred Stock
or to make any other distribution to the holders of its Preferred Stock (other
than a regular quarterly cash dividend at a rate not in excess of 125% of the
rate of the last regular quarterly cash dividend theretofore paid), (ii) to
distribute to the holders of its Preferred Stock options, warrants or rights to
subscribe for or purchase any additional shares of Preferred Stock or shares of
any other class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of its outstanding shares of Preferred Stock),
(iv) to effect any consolidation or merger into or with, or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions not in the ordinary course
of business, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company or (vi) to declare or pay
any dividend on the Common Stock payable in shares of Common Stock or to effect
a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock) then, in each such case, the Company shall give to each registered
holder of the Rights, and to the Rights Agent, in the manner provided in
Section 26, written notice of such proposed action, which shall specify the
record date for such stock dividend or distribution or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is expected to take place (and the date of
participation therein by the holders of the Common Stock and/or Preferred Stock
if any such date is to be fixed). Such notice shall be given (a) in the case
of any action covered by clause (i) or (ii) of the preceding sentence, at least
six days prior to the record date and (b) in the case of any other such action,
at least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of Common Stock and/or the
Preferred Stock, whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then the Company
shall, as soon as practicable thereafter, give to each registered holder of the
Rights, and to the Rights Agent, in the manner provided in Section 26, written
notice of the occurrence of such transaction, which notice shall describe such
transaction and its consequences in reasonable detail.
SECTION 26. OTHER NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the registered holder
of any Rights or Rights Certificate to or on the Company shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address shall be filed in writing with the Rights Agent) as follows:
37
<PAGE> 41
Dynamex Inc.
13355 Noel Road, Suite 1650
Dallas, Texas 75240
Attention: Robert P. Capps
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the registered holder
of any Rights or Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address shall be filed in writing with the Company) as
follows:
Harris Trust and Savings Bank
311 West Monroe Street, 14th Floor
Chicago, Illinois 60690
Attention: Keith Bradley
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the registered holder of any Rights or Rights
Certificate shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the last address of such holder as
shown on the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Stock of the
Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date, the Company and the Rights Agent shall, if so directed by
the Company, supplement or amend any provision of this Agreement, without the
approval of any holders of certificates representing the Common Stock. From
and after the Distribution Date, the Company and the Rights Agent shall, if so
directed by the Company, supplement or amend this Agreement, without the
approval of any holders of the Rights or the Rights Certificates, in order: (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
(iii) to shorten or lengthen any time period specified hereunder or (iv) to
change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable and which shall not adversely affect, as
determined by the Company, the interests of the holders of the Rights or the
Rights Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); provided, however, that this Agreement may
not be supplemented or amended pursuant to clause (iii) of this sentence (A) to
lengthen any time period unless (1) approved by a majority of the Disinterested
Directors and (2) such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the registered holders of
the Rights or (B) to lengthen any time period relating to when the Rights may
be redeemed if at such time the Rights are not then redeemable. Upon the
delivery of a certificate from an appropriate officer of the Company stating
that the proposed supplement or amendment is in compliance with the terms of
this Section
38
<PAGE> 42
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of the Rights shall be deemed
coincident with the interests of the holders of the Common Stock of the
Company. Notwithstanding any other provision hereof, the Rights Agent's
consent, which consent shall not be unreasonably withheld, must be obtained
regarding any amendment or supplement pursuant to this Section 27 which alters
the Rights Agent's rights or duties.
SECTION 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the percentage of such outstanding shares of Common
Stock of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. The Board of Directors of the Company (or,
as set forth herein, certain specified members thereof) shall have the power
and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement, including,
without limitation, a determination to redeem or not to redeem the Rights or to
supplement or amend this Agreement. All such calculations, actions,
interpretations and determinations (including, for purposes of clause (ii)
below, all omissions with respect to the foregoing) which are done or made by
the Board of Directors of the Company (or such specified members thereof) in
good faith shall (i) be final, conclusive and binding on the Company, the
Rights Agent and the holders of the Rights and (ii) not subject any director to
any liability to the holders of the Rights.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights and the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock of the Company) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the
Rights and the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock of the Company).
SECTION 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other lawful authority to be
39
<PAGE> 43
invalid, void or unenforceable, the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that,
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company shall
determine in good faith that severing the same from this Agreement would
adversely affect the purposes or effect of this Agreement, the right of
redemption set forth in Section 23 shall be reinstated and shall not expire
until the Close of Business on the 20th day following the date of such
determination by the Board of Directors of the Company.
SECTION 32. GOVERNING LAW. This Agreement and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
SECTION 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
40
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be affixed and
attested, all as of the day and year first above written.
DYNAMEX INC.
By /s/ Robert P. Capps
----------------------------------
(Corporate Seal) Name: Robert P. Capps
Title: Vice President-Finance and
Corporate Development
Attest:
By
----------------------------------
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
AS RIGHTS AGENT
By /s/ Keith A. Bradley
----------------------------------
(Corporate Seal) Name: Keith A. Bradley
Title: Assistant Vice President
Attest:
By /s/ Julie A. Powell
--------------------------------
Name: Julie A. Powell
Title: Trust Officer
41
<PAGE> 45
EXHIBIT A
FORM OF
STATEMENT OF RESOLUTION
ESTABLISHING A SERIES OF SHARES OF PREFERRED STOCK
OF
DYNAMEX INC.
To the Secretary of State
of the State of Delaware:
Pursuant to the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, Dynamex Inc., a Delaware corporation
(the "Corporation"), submits the following statement for the purpose of
establishing and designating a series of preferred stock and fixing and
determining the relative rights and preferences thereof:
The following resolution, establishing and designating a series of
shares of preferred stock and fixing and determining the relative rights and
preferences thereof, was duly adopted by the Board of Directors of the
Corporation on June 3, 1996:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, as amended (the "Articles"), the Board of Directors hereby
creates a series of Preferred Stock, without par value (the "Preferred Stock"),
of the Corporation and hereby states the designation and number of shares, and
fixes the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be 500,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends,
the holders of shares of Series A
<PAGE> 46
Preferred Stock, in preference to the holders of Class A Common Stock,
par value $.01 per share, and Class C Common Stock, par value $.01 per
share (collectively, the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the last business
day of November, February, May and August in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $.25 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all
cash dividends, and 100 times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions, other than
a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $.25 per
share on the Series A Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend PaYment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the
<PAGE> 47
date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for
determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid
on the shares of Series A Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall
at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Articles of Amendment creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided
by law, holders of Series A Preferred Stock shall have no special
voting rights and their
A-3
<PAGE> 48
consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A
Preferred Stock: or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
A-4
<PAGE> 49
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Articles or in any other Articles of Amendment creating a
series of Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
A-5
<PAGE> 50
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Articles shall not be amended in any
manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting together as a single
class.
Section 11. Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in
A-6
<PAGE> 51
distributions and to have the benefit of all other rights of holders of Series
A Preferred Stock.
Dated as of June 3, 1996.
DYNAMEX INC.
By:
-------------------------------------
Its:
----------------------------------
A-7
<PAGE> 52
EXHIBIT B
[FORM OF RIGHTS CERTIFICATE]
CERTIFICATE NO. R- RIGHTS
NOT EXERCISABLE AFTER MAY 31, 2006 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES DESCRIBED IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO OR HELD BY ANY PERSON WHO IS,WAS OR BECOMES AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF
SUCH PERSON, OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL
AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO IS, WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 11(a)(ii) OF THE RIGHTS
AGREEMENT.](1)
- ---------------
(1)The portion of the legend in brackets shall be inserted
only if applicable and shall replace the preceding sentence.
<PAGE> 53
RIGHTS CERTIFICATE
DYNAMEX INC.
This certifies that , or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of July 5, 1996 (the "Rights
Agreement") between Dynamex Inc., a Delaware corporation (the "Company"), and
Harris Trust and Savings Bank, an Illinois banking corporation (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M.,
Dallas time, on May 31, 2006 at the designated office of the Rights Agent, or
at the office of its successor as Rights Agent, one one-hundredth of a fully
paid and nonassessable share of Series A Junior Participating Preferred Stock,
without par value (the "Preferred Stock"), of the Company at a purchase price
of $45.00 per one one-hundredth a share of Preferred Stock (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and the Form of Certification of Status duly
executed, along with a signature guarantee and such other and further
documentation as the Rights Agent may reasonably request. The number of Rights
evidenced by this Rights Certificate (and the number of one one-hundredths of a
share of Preferred Stock which may be purchased upon the full exercise hereof)
set forth above, and the Purchase Price set forth above, are the number and the
Purchase Price as of ______________________, 1996, based on the Preferred Stock
as constituted on such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-hundredths of a share of Preferred Stock which
may be purchased upon the full exercise of the Rights evidenced by this Rights
Certificate are subject to change and adjustment upon the happening of certain
events. Capitalized terms not defined herein have the respective meanings
specified in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Rights Certificate are Beneficially Owned by (i) an Acquiring
Person or any Affiliate or Associate of such Acquiring Person, (ii) a
transferee of an Acquiring Person or any Affiliate or Associate of such
Acquiring Person who becomes a transferee after such Acquiring Person becomes
such or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person or any Affiliate or Associate of such
Acquiring Person who becomes a transferee prior to or concurrently with such
Acquiring Person becoming such, such Rights shall become void, and no holder
hereof shall have any right to exercise such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
incorporated herein by reference and made a part hereof, to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties
<PAGE> 54
and immunities hereunder of the Rights Agent, the Company and the holders of
the Rights Certificates, which limitations of rights include the suspension of
the exercisability of the Rights represented hereby under the circumstances set
forth in the Rights Agreement. Copies of the Rights Agreement are on file at
the principal executive office of the Company and at the designated office of
the Rights Agent and are also available upon written request to the Secretary
of the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the designated office of the Rights Agent, along with a
signature guarantee and such other and further documentation as the Rights
Agent may reasonably request, may be exchanged for one or more Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase the same aggregate number of shares of Preferred Stock as the Rights
evidenced by the Rights Certificates surrendered. If this Rights Certificate
shall be exercised in part, the holder shall be entitled to receive, upon
surrender hereof, one or more Rights Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company at a
redemption price of $.01 per Right or (ii) may be exchanged, in whole or in
part, for shares of Preferred Stock or shares of the Company's Common Stock,
$.01 par value.
No fractional share of Preferred Stock will be issued upon the
exercise of any Rights represented hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock), but in
lieu thereof a cash payment will be made as provided in the Rights Agreement.
No holder, as such, of this Rights Certificate shall be entitled to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, or shall be deemed for any other purpose to be the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof; nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any other matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement) or to receive dividends, subscription rights
or other distributions, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised in accordance with the provisions of the
Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by an authorized signatory of
the Rights Agent.
B-2
<PAGE> 55
IN WITNESS WHEREOF, this Rights Certificate has been executed by the
Company by the duly authorized facsimile signature of a proper officer of the
Company and a facsimile of its corporate seal has been imprinted hereon and
duly attested by the duly authorized facsimile signature of a proper officer of
the Company.
Dated as of
----------------------, -------
DYNAMEX INC.
By
-------------------------------------
Name:
Title:
[CORPORATE SEAL]
ATTEST:
- -----------------------------------
Countersigned:
--------------------------,
as Rights Agent
- -----------------------------------
By
--------------------------------
Authorized Signature
Date of Countersignature:---------------------, --------.
B-3
<PAGE> 56
[Reverse Side of Rights Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by this Rights Certificate)
To Dynamex Inc.
The undersigned hereby irrevocably elects to exercise
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of such Rights (or other securities
of the Company or of any other persons that may be issuable upon exercise of
all Rights) and requests that certificates for such shares of Preferred Stock
(or other such securities) be issued in the name of:
Please insert social security
or other identifying number:
-------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights represented by this Rights
Certificate, a new Rights Certificate for the remaining unexercised Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:
-----------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: ---------------------, --------
----------------------------------------------
Signature
B-4
<PAGE> 57
Signature Guaranteed:
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Rights Agent, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Rights Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate
[ ] is
[ ] is not
being exercised, assigned or transferred by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did
[ ] did not
acquire the Rights evidenced by this Rights Certificate from any person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate
thereof.
----------------------------------------
Signature
Date: ---------------------, -------
B-5
<PAGE> 58
NOTICE
The signature(s) on the foregoing Form of Election to Purchase and
Certification of Status must correspond to the name written upon the face of
this Rights Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the Certification of Status set forth above is not
completed, the Company will deem the Beneficial Owner of the Rights represented
by this Rights Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement) and, in
the case of the issuance of a new Rights Certificate, will affix a legend to
such effect on any Rights Certificates issued in exchange for this Rights
Certificate.
B-6
<PAGE> 59
[Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer this Rights Certificate)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
---------------, --------
------------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Rights Agent, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Rights Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
B-7
<PAGE> 60
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate
[ ] is
[ ] is not
being sold, assigned or transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did
[ ] did not
acquire the Rights evidenced by this Rights Certificate from any person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate
thereof.
----------------------------------------
Signature
Date: ---------------------, -------
B-8
<PAGE> 61
NOTICE
The signature(s) on the foregoing Form of Assignment and Certification
of Status must correspond to the name written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the Certification of Status set forth above is not
completed, the Company will deem the Beneficial Owner of the Rights represented
by this Rights Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement) and, in
the case of an Assignment, will affix a legend to such effect on any Rights
Certificates issued in exchange for this Rights Certificate.
B-9
<PAGE> 62
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE SHARES OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
On June 3, 1996, the Board of Directors of Dynamex Inc. (the
"Company") declared a dividend of one preferred stock purchase right (a
"Right") for each outstanding share of Common Stock, $.01 par value, (the
"Common Stock"), of the Company. The dividend is payable on May 31, 1996 (the
"Record Date") to the shareholders of record of Common Stock at the close of
business on such date. Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, without par value (the "Series A Preferred Stock"), at a price
of $45.00 per one one-hundredth of a share of Series A Preferred Stock (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in the Rights Agreement dated as of _July 5, 1996 (the
"Rights Agreement") between the Company and Harris Trust and Savings Bank, as
Rights Agent (the "Rights Agent"). Capitalized terms not defined herein have
the respective meanings specified in the Rights Agreement.
Until the earlier to occur of (i) 10 days after the first public
announcement that a Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company or any entity holding Shares of Common Stock for or pursuant to the
terms of any such plan) (an "Acquiring Person"), either alone or together with
its Affiliates and Associates, has become the Beneficial Owner of 15% or more
of the outstanding shares of Common Stock and (ii) 10 Business Days (or such
later date as may be determined by action of the Board of Directors prior to
the time any Person becomes an Acquiring Person) after the commencement of, or
the announcement of an intention to commence, a tender or exchange offer the
consummation of which would result in any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company or any entity holding Shares of Common Stock for or
pursuant to the terms of any such plan) becoming the Beneficial Owner of 15% or
more of such outstanding shares of Common Stock (the earlier of clause (i) and
(ii) being hereinafter called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Stock certificates outstanding as
of the Record Date, by such Common Stock certificates, with a copy of this
Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or the earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, either upon transfer of
outstanding shares of Common Stock or the original issuance of additional
shares of Common Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or the earlier redemption
or expiration of the Rights), the surrender for transfer of any certificate for
shares of Common Stock outstanding as of the Record Date, without
<PAGE> 63
such notation and whether or not a copy of this Summary of Rights is attached
thereto, will also constitute the transfer of the Rights associated with the
shares of Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to the registered holders of the shares
of Common Stock as of the close of business on the Distribution Date, and such
separate Rights Certificates will thereafter constitute the sole evidence of
the Rights. Each share of Common Stock issued after the Distribution Date and
prior to the earlier of the redemption or expiration of the Rights, pursuant to
the exercise of any option, warrant, right or conversion or exchange privilege
contained in any option, warrant, right or convertible or exchangeable security
(other than the Rights) issued by the Company prior to the Distribution Date,
shall also include the right to receive a Right (unless the Board of Directors
expressly provides to the contrary at the time of issuance of any such option,
warrant, right, convertible or exchangeable security) and Rights Certificates
evidencing such Rights shall be issued at the time of issuance of such shares
of Common Stock.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on May 31, 2006 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Series A
Preferred Stock or other securities, cash or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A Preferred Stock, (ii) upon the grant to the
holders of shares of Series A Preferred Stock of certain options, warrants or
rights to subscribe for or purchase shares of Series A Preferred Stock at a
price, or securities convertible into or exchangeable for shares of Series A
Preferred Stock with a conversion or exchange price, less than the then current
market price of the shares of Series A Preferred Stock or (iii) upon the
distribution to the holders of shares of Series A Preferred Stock of evidences
of indebtedness or assets (other than a regular quarterly cash dividend at a
rate not in excess of 125% of the rate of the last regular quarterly cash
dividend theretofore paid or a dividend payable in shares of Series A Preferred
Stock) or options, warrants or rights (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths
of a share of Series A Preferred Stock issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Stock or
a stock dividend on the Common Stock payable in shares of Common Stock or a
subdivision, consolidation, combination, or reclassification of the Common
Stock occurring, in any such case, prior to the Distribution Date.
C-2
<PAGE> 64
Shares of Series A Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Series A Preferred Stock will be
entitled to a minimum preferential quarterly dividend payment of $.25 per share
but will be entitled to an aggregate dividend of 100 times the dividend
declared per share of Common Stock. In the event of liquidation, the holders
of the shares of Series A Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of the shares
of Series A Preferred Stock shall be entitled to an aggregate payment of 100
times the payment made per share of Common Stock, as adjusted to reflect any
dividend on the Common Stock payable in shares of Common Stock or any
subdivision, combination or reclassification of the Common Stock. Each share
of Series A Preferred Stock will have 100 votes, voting together with the
Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of Series
A Preferred Stock will be entitled to receive 100 times the amount received per
share of Common Stock. These rights are protected by customary antidilution
provisions.
Because of the nature of the dividend, liquidation and voting rights
of the Series A Preferred Stock, the value of the one one-hundredth interest in
a share of Series A Preferred Stock purchasable upon exercise of each Right
should approximate the value of one share of Common Stock.
In the event that any Person, together with its Affiliates and
Associates, becomes the Beneficial Owner of 15% or more of the Shares of Common
Stock then outstanding, proper provision shall be made so that each registered
holder of a Right will thereafter have the right to receive upon exercise
thereof at the then current Purchase Price of the Right that number of shares
of Common Stock of the Company having a market value of two times such Purchase
Price. Notwithstanding the foregoing, after the occurrence of the event
described in this paragraph, all Rights which are, or (under certain
circumstances specified in the Rights Agreement) were, Beneficially Owned by an
Acquiring Person or any Affiliate or Associate thereof will be void. Under no
circumstances may a Right be exercised following the occurrence of a
transaction described in this paragraph prior to the expiration of the
Company's right of redemption.
In the event that, on or after the first public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such (the
"Share Acquisition Date"), the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold or transferred (in one transaction or a series of
transactions other than in the ordinary course of business), proper provision
shall be made so that each registered holder of a Right (except Rights which
have become void as specified above) will thereafter have the right to receive,
upon the exercise thereof at the then current
C-3
<PAGE> 65
Purchase Price of the Right, the number of shares of common stock of the
acquiring company (or of another Person affiliated therewith as provided in the
Rights Agreement) which at the time of such transaction will have a market
value of two times such Purchase Price.
At any time after any person becomes an Acquiring Person and prior to
the time such Person, together with its Affiliates and Associates, becomes the
Beneficial Owner of 50% or more of the outstanding shares of Common Stock, the
Board of Directors of the Company may exchange the Rights (other than Rights
which have become void), in whole or in part, at the exchange rate of one share
of Common Stock, or one one-hundredth of a share of Series A Preferred Stock
(or of a share of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges), per Right, subject to
adjustment as provided in the Rights Agreement.
With certain exceptions, no adjustment in the Purchase Price will be
made until the cumulative adjustments required equal at least 1% of the
Purchase Price. No fractional shares of Series A Preferred Stock will be
issued (other than fractions which are integral multiples of one one-hundredth
of a share of Series A Preferred Stock), but in lieu thereof a payment in cash
will be made based on the market price of the shares of Series A Preferred
Stock on the last trading day prior to the date of exercise or exchange.
At any time prior to the earlier of (i) the 10th Business Day after
the Share Acquisition Date (subject to one or more extensions by a majority of
the Disinterested Directors) and (ii) the Final Expiration Date, the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend, subdivision or combination or any similar transaction
occurring after the date of the Rights Agreement (the "Redemption Price");
provided, however, that, under certain circumstances specified in the Rights
Agreement, the Rights may not be redeemed unless there are Disinterested
Directors in office and such redemption is approved by a majority of such
Disinterested Directors. The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion shall establish. After the redemption period has expired,
the Company's right of redemption may be reinstated, under the circumstances
specified in the Rights Agreement, which include the concurrence of a majority
of the Disinterested Directors, if an Acquiring Person shall have reduced to
10% or less the number of outstanding shares of Common Stock Beneficially Owned
in a transaction or series of transactions not involving the Company and not
constituting specified transactions which result in a discounted Purchase Price
under the Rights Agreement. Immediately after any action by the Board of
Directors directing the redemption of the Rights, the right to exercise the
Rights shall terminate and thereafter the registered holders of the Rights
shall be entitled to receive only the Redemption Price per Right.
C-4
<PAGE> 66
The term "Disinterested Director" means any member of the Company's
Board of Directors who is unaffiliated with an Acquiring Person or any
Affiliate or Associate thereof and was a member of the Company's Board of
Directors prior to the time that an Acquiring Person became such and any
successor of a Disinterested Director who is unaffiliated with an Acquiring
Person or any Affiliate or Associate thereof and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on the
Company's Board of Directors.
Prior to the Distribution Date, the terms of the Rights may be
supplemented or amended by the Board of Directors of the Company in any manner
and thereafter the Rights may be supplemented or amended by such Board of
Directors, without the approval of any holders of the Rights or the Rights
Certificates, in certain respects which shall not adversely affect, as
determined by the Company, the interests of such holders; provided, however,
that the Rights Agreement cannot be amended to lengthen (i) any time period
unless (A) such lengthening is approved by a majority of the Disinterested
Directors and (B) such lengthening is for the benefit of the holders of the
Rights or (ii) any time period relating to when the Rights may be redeemed if
at such time the Rights are not then redeemable.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Registration Statement on Form S-1 No.
333-05293. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
C-5
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment No. 1 to Amended and Restated Employment Agreement
("Amendment") is made and entered into on July 1, 1996, between DYNAMEX INC., a
Delaware corporation, hereinafter referred to as the "Company," and RICHARD K.
MCCLELLAND, hereinafter referred to as "Executive." This Amendment shall be
effective as of September 27, 1995.
WHEREAS, Executive and the Company have entered into an Amended and
Restated Employment Agreement, dated as of July 11, 1995 (the "Agreement"); and
WHEREAS, the parties hereto mutually desire to amend certain
provisions of the Agreement;
NOW, THEREFORE, the parties hereto agree as follows.
1. Section 3(a) of the Agreement shall hereinafter read as
follows:
"3. Compensation
(a) Base Salary. Executive agrees to accept as full
consideration for his employment, $200,000 per year during the term of
this Agreement, payable semi-monthly, subject to all appropriate
withholdings. Executive's base salary may be increased annually in
the sole discretion of the Board."
2. The following shall be added as Section 3(g) to the Agreement:
"(g) Change of Control. In the event of a Change of
Control (as defined hereinafter), the Company or the surviving entity
in such Change of Control, as the case may be, shall continue to pay
to Executive the compensation set forth in Section 3 hereof for the
greater of (i) two years from the effective date of the Change of
Control or (ii) the remainder of the term of this Agreement. "Change
of Control" shall mean any of the events listed below:
(i) a sale, transfer or other conveyance of all or
substantially all of the assets of the Company on a
consolidated basis;
(ii) the acquisition of beneficial ownership (as such term
is defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended, the "Exchange Act") by any
"person" (as such term is used in Sections 13(d) and 14(d) of
the "Exchange Act"), other than (A) the Company, (B) Cypress
Capital Partners I, L.P., (C) James M. Hoak or (D) any of the
affiliates of any of the foregoing, directly or indirectly, of
securities representing 15% of the total number of votes that
may be cast for the election of directors of the Company;
<PAGE> 2
(iii) the commencement (within the meaning of Rule 14d-2
promulgated under the Exchange Act) of a "tender offer" for
stock of the Company subject to Section 14(d)(2) of the
Exchange Act;
(iv) the failure at any annual or special meeting of the
Company's stockholders following an "election contest" subject
to Rule 14a-11 promulgated under the Exchange Act, of any
persons nominated by the Company in the proxy material mailed
to stockholders by the management of the Company to win
election to seats on the Board, excluding only those who die,
retire voluntarily, are disabled or are otherwise disqualified
in the interim between their nomination and the date of the
meeting."
3. Except as set forth above, the other provisions of the
Agreement shall remain in full force and effect.
4. This Amendment shall be governed by and construed in
accordance with the laws of Delaware.
EXECUTED the day, month and year first above written.
DYNAMEX INC.
By:/s/ Robert P. Capps
---------------------------------
Robert P. Capps, Vice President
/s/ Richard K. McClelland
--------------------------------------
Richard K. McClelland
2
<PAGE> 3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of July ____,
1995, is by and between Parcelway Systems Holding Corp., a Delaware corporation
("Holdings") and its wholly-owned subsidiaries (the "Subsidiaries" and
collectively with Holdings, the "Company"), and Richard K. McClelland
("Executive"), and amends, restates and supersedes the Employment Agreement,
dated as of May 31, 1995 by and between the parties hereto.
W I T N E S S E T H:
WHEREAS, Executive has extensive experience and contacts in the
messenger and courier service business; and
WHEREAS, Company desires to utilize Executive's experience and
contacts by employing Executive in accordance with the terms and conditions of
this Agreement; and
WHEREAS, Executive desires to be employed by Company in accordance
with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing recital and of the
mutual covenants set forth below, the parties hereto agree as follows:
1. Employment. (a) Company agrees to employ Executive, on the
terms and conditions set forth below. Executive's job title shall be President
and Chief Executive Officer (or such other position as Company and Executive
may mutually agree) and his duties shall include those customarily performed by
a chief executive officer of a corporation, and performing such other similar
services for Company as may be directed from time to time by the Board of
Directors of Company. Throughout the term of this Agreement, Executive shall
be a member of the Board of Directors of the Company. The Company and the
Executive acknowledge that substantially all of Executive's duties under this
Agreement are to be performed by Executive for Parcelway Courier Systems Canada
Ltd. ("Parcelway Canada"), a wholly- owned subsidiary of Holdings, although
Executive will be required to perform certain duties on behalf of Holdings and
its other wholly-owned subsidiaries.
(b) Executive agrees during the term of his employment to (i)
devote his full business time (at least 40 hours per week) and his best
efforts, skills and abilities exclusively to the performance of his duties as
stated in this Agreement and to the furtherance of Company's business; (ii)
well and faithfully serve the Company; (iii) use his best efforts to preserve
the business of Company and the goodwill of all employees, customers, suppliers
and other persons having business relations with Company.
<PAGE> 4
2. Term. The employment of Executive shall begin on the date of
this Agreement and shall continue until the earliest of:
(a) the date Company terminates it for "just cause" upon three
days written notice,
(b) the death or disability of Executive,
(c) May 31, 2000 (provided, however, that such date shall be
automatically extended for successive one-year renewal terms unless Company
provides written notice to Executive at least 90 days' prior to May 31, 2000 or
the expiration of any such renewal term), or
(d) the date Executive terminates it for any reason upon 60 days
written notice (it being understood by the parties that any resignation by
Executive from his employment, unless specifically requested by Company or
because of Company's material breach of its obligations hereunder, shall be
deemed a termination by Executive).
For purposes of this Agreement, Executive's "disability" shall mean
any time Executive is substantially unable to perform his duties to the Company
on a full time basis due to injury, illness or disability (physical or mental)
(other than by reason of authorized vacation or leave) for a period in excess
of 40 working days in any six month period, as determined by the Board of
Directors of Holdings (the "Board").
For purposes of this Section 2, "just cause" for termination shall
mean:
(a) any material breach of the covenants and obligations of
Executive under this Agreement;
(b) commission of an act of fraud, dishonesty, gross negligence or
willful malfeasance in connection with Executive's duties and obligations under
this Agreement;
(c) the failure or inability for any reason to devote his full
business time to the business of Company (other than failure or inability
caused by Executive's disability);
(d) the material disregard of written instructions, policies or
procedures of the Board of Directors of the Company;
(e) commission of any act involving moral turpitude;
2
<PAGE> 5
(f) the commission of any act or the suffering by Executive of any
occurrence or a state of facts, which renders Executive incapable of performing
his duties hereunder, or which adversely affects or could reasonably be
expected to adversely affect the Company or the Company's reputation; or
(g) the adjudication of Executive as a bankrupt or insolvent or
Executive's filing a petition in bankruptcy, reorganization, insolvency,
readjustment of debt or arrangement under any bankruptcy, insolvency,
dissolution, or liquidation law.
Notwithstanding anything to the contrary in this Agreement, the
provisions of Sections 6, 7, 8 and 9 shall survive any termination of
Executive's employment under this Agreement.
3. Compensation.
(a) Base salary. Executive agrees to accept as full consideration
for his employment, C$205,000 per year during the term of this Agreement,
payable semi-monthly, subject to all appropriate withholdings. Executive's
base salary may be increased annually in the sole discretion of the Board.
(b) Bonuses. Executive shall be entitled to receive bonuses from
the Company as follows:
(i) 1995 Bonus. In the event that Executive shall be
employed by the Company on December 31, 1995, Executive shall be
entitled to receive a bonus with respect to fiscal year ending
December 31, 1995. Such bonus will consist of (a) an amount equal to
25% of Executive's base salary for such year and (b) an amount equal
to 1% of Executive's base salary for each 1% of the Performance Ratio
(as defined herein) above 100%, up to a maximum percentage of 50%.
The Performance Ratio shall be determined by comparing the level of
the annual consolidated pre-tax income of Holdings before the
inclusion of any extraordinary gains or losses, as calculated in
accordance with the unaudited consolidated financial statements of
Holdings for the five months ended December 31, 1995, as same have
been prepared and certified by the Chief Financial Officer of the
Company as fairly presenting the financial condition as of the such
date and the results of operations for the period then ended (the
"Actual Result") to the budgeted amount of annual consolidated pre-tax
income of Holdings before the inclusion of any extraordinary gains or
losses, as such budget shall have been approved by the Board by August
31, 1995 (the "Target Result"). The 1995 Bonus shall be payable by
March 31, 1996.
(ii) Subsequent Bonuses. Within 90 days of the conclusion
of each fiscal year, commencing with the fiscal year ending July 31,
1996, Executive shall be eligible to receive an annual bonus from the
Company in an amount
3
<PAGE> 6
determined by the Board, which amount shall not exceed 60% of
Executive's base salary for the fiscal year then ended. Within 30
days of the commencement of each fiscal year subsequent to the fiscal
year ended July 31, 1995, the Board shall inform Executive of the
general criteria that it will consider in determining Executive's
annual bonus for such year (it being acknowledged that the criteria
for the first five months of fiscal 1996 are as set forth in
subsection (i) above), provided that the Board may consider additional
or different criteria that it deems relevant to the bonus
determination.
(c) Car allowance. Executive shall receive a car allowance of
C$900 per month.
(d) Vacation, medical insurance and fringe benefits. Executive
shall be entitled to four weeks paid vacation per calendar year. Executive
shall be eligible to participate in all benefit plans in which employees of the
Company participate, including without limitation, those pertaining to life,
accident, sickness, medical and disability insurance, and such other fringe
benefits as the Board may, in its sole discretion, determine. Participation in
any such plans is subject to Executive's satisfaction of any pre-conditions of
general application to the participation in such plans.
(e) Business expenses. Upon proper documentation and compliance
with Company procedures by Executive, Company shall reimburse Executive for all
reasonable out-of-pocket business expenses incurred by him in connection with
his duties on behalf of Company in accordance with Company policy.
(f) Stock Options. Executive shall be eligible to participate in
the Employer's existing management stock option plan (the "Plan") and in
connection therewith has been initially granted stock options for the purchase
of 13,750 shares of Holdings Common Stock at an exercise price established by
the Board on the date of grant. Such options vest ratably over five years as
set forth in the form of option agreement attached hereto as Exhibit A. The
Board may, in its sole discretion, grant additional stock options to Executive
pursuant to the Plan.
4. Grant Options. The Company has granted to Executive stock
options ("Grant Options") for the purchase of 12,000 shares of Holdings Common
Stock at an exercise price of US $17.00 per share ("Exercise Price") pursuant
to the form of option agreement attached hereto as Exhibit B. At the time of
Executive's exercise of all or any of the Grant Options, the Company shall pay
to Executive a bonus equal to the Exercise Price multiplied by the number of
shares to be purchased by virtue of such exercise. The shares of Holdings
Common Stock that are to be issued to Executive upon exercise of the Grant
Options shall be referred to herein as the "Grant Shares".
4
<PAGE> 7
5. Liquidity of Grant Shares. During the period that the Grant
Shares are not publicly traded, the Company and the Executive shall have the
following rights and obligations with respect to the Grant Shares:
(a) Executive Termination.
(i) in the event of termination by Executive on or before
May 31, 2000 or termination of Executive for commission of fraud,
dishonesty, gross negligence or willful malfeasance, the Company shall
have the option (but shall not be obligated) to purchase any or all of
the Grant Shares within 30 days of such termination event at the Fair
Market Value (defined below) of such securities. Such repurchase
option of the Company shall be referred to herein as the "Repurchase
Option".
(ii) in the event of termination of Executive due to his
death, or termination for just cause (other than for the cause
specified in subparagraph (i) above), the Company shall have a
Repurchase Option and, additionally, the Executive shall have the
option to sell all, but not less than all, of the Grant Shares to the
Company within 30 days of the termination event at the Fair Market
Value of such securities. The Executive's sale option shall be
referred to herein as the "Put Option." In the event of a Repurchase
Option or a Put Option effected pursuant to this subparagraph (ii),
the Company shall have the option to pay for the Grant Shares in three
equal annual installments, with the first of such installments payable
on the first anniversary of the termination event.
(iii) in the event that the Executive is terminated without
just cause, the Company has a Repurchase Option and the Executive has
a Put Option. In the event of a Repurchase Option or a Put Option
effected pursuant to this subparagraph (iii), the Company shall pay
for the Grant Shares within 60 days of the determination of Fair
Market Value.
The "Fair Market Value" for purposes of this Section 5(a) shall be determined
as follows: The fair market value of the Grant Shares as mutually agreed upon
by Company and Executive; however, if Company and Executive are unable to agree
as to the fair market value of such securities within twenty (20) days
following a Repurchase or Put Option, the Company and Executive shall appoint a
mutually acceptable appraiser ("Appraiser") to value the Common Stock of the
Company. If the Company and Executive agree as to the Appraiser, they shall
promptly instruct the Appraiser to value the Common Stock with the
understanding that such Appraiser's valuation shall be the Fair Market Value
and shall be binding upon the Company and Executive. If the Company and
Executive are unable to mutually agree upon an Appraiser (within ten days
following the expiration of the 20-day period described above), each of the
Company and Executive shall appoint an Appraiser to value the
5
<PAGE> 8
Common Stock of the Company. Each of the appointed Appraisers shall determine
the fair market value of the Common Stock within 60 days of their selection and
shall deliver to each of the Company and the Executive a copy of its appraisal
within such 60 day period. If the determination of each of the appointed
Appraisers is 90% or more but less than 110% of the average of the two
determinations, the fair market value shall be such average. If the
determination of either of the appointed Appraisers is less than 90% or more
than 110% of such average, then the appointed Appraisers shall, within five
days thereafter, select a third Appraiser. The determination of such third
Appraiser (which shall not be higher than the higher of, nor lower than the
lower of, the determinations of the two first appointed Appraisers), shall
govern and shall be final and binding on all parties. The fees and expenses of
any such Appraiser(s) shall be borne equally by the Executive and the Company.
(b) Registration Rights. The Executive shall have certain
piggy-back registration rights with respect to the Grant Shares as set forth in
that certain Registration Rights Agreement between the Company, the Executive,
Preferred Risk Life Insurance Co. and Preferred Risk Mutual Insurance Co. in
substantially the form set forth on Exhibit C hereto.
(c) Restrictions on Transfer. Executive understands and agrees
that the following restrictions and limitations are applicable to his purchase
and resales, pledges, hypothecations, or other transfers of the Grant Shares:
(i) Transfer of Grant Shares.
(1) The Grant Shares shall not be sold, pledged,
hypothecated, or otherwise transferred unless they are
registered under the Securities Act and applicable state
securities laws or an exemption from such registration is
available.
(2) Legends will be placed on any certificate or
other document evidencing the Grant Shares in substantially
the following form:
The Shares represented by this certificate have not been
registered with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, or under any state
securities act or other similar state statutes in reliance
upon exemptions from registration as provided in those
statutes and the rules and regulations promulgated thereunder.
The sale or other disposition of the Shares are restricted, as
set forth in the Amended and Restated Employment Agreement
dated as of July ___, 1995, among the Company and the
Shareholder, and the effectiveness of any such sale or other
disposition may be conditioned upon
6
<PAGE> 9
receipt by the Company of a written opinion of counsel
satisfactory to the Company and its counsel that such sale or
other disposition can be made without registration under the
Securities Act of 1933, as amended, any state securities act,
and other applicable statutes. By acquiring the Shares
represented by this certificate, the Shareholder represents
that he will not sell or otherwise dispose of such shares
without registration or other compliance with the aforesaid
statutes and the rules and regulations promulgated thereunder.
(3) Stop transfer instructions will be placed
with the transfer records of the Company with respect to the
Shares so as to restrict the resale, pledge, hypothecation, or
other transfer thereof.
(ii) First Refusal Rights.
(1) If at any time during the term of this
Agreement, Executive (the "Selling Shareholder") shall desire
to sell or otherwise dispose of all or any part of his Grant
Shares pursuant to a bona fide offer from any third party (the
"Third Party Offer"), he shall give the Company written notice
(the "Notice") of such intention. The Notice shall include an
offer (the "Offer") to sell such Grant Shares to the Company
upon the terms and conditions described below. The Notice
shall also include a copy of the written Third Party Offer
stating its terms and conditions, including the number and
price per share of the Grant Shares to be purchased, the
method of payment, whether the Third Party Offer is requiring
the purchase of all of the Grant Shares, and the proposed
closing date (which shall in no event be sooner than the end
of the 60-day period described in subsection (b) below).
(2) The Company shall have 30 days from the date
it receives the Notice to accept or reject the Offer in
writing. If the Company accepts the Offer, the acceptance
shall set forth the arrangements for closing, which shall
occur no later than the date proposed by the Third Party
Offer.
(3) Upon the expiration of the 60-day period
without acceptance of the Offer in writing by either of the
Company, or upon the earlier receipt of rejection of the Offer
in writing by the Company, or in the event the Company fails
to agree to purchase all of the Grant Shares subject to the
Third Party Offer, the Selling Shareholder shall be released
from his restrictions under Section 5(c)(ii) of this Agreement
with respect to those Grant Shares being sold pursuant to the
Third Party Offer. The
7
<PAGE> 10
Selling Shareholder shall then be entitled to sell his Grant
Shares, but only pursuant to the Third Party Offer (except
that any purchaser must agree in writing to take the Grant
Shares subject to the terms of this Agreement). Except as
otherwise provided in this Agreement, the Selling Shareholder
shall remain subject to this Agreement to the extent he
retains any of his Grant Shares, including those Shares
subject to the Offer.
(4) If all or any part of the Shareholder's Grant
Shares are involuntarily encumbered or transferred by judicial
process to any person (the "Purchaser") other than the other
Shareholders or pursuant to the terms of this Agreement, the
Purchaser shall be deemed to have made an Offer pursuant to
this Section 5(c)(ii) to sell the Grant Shares, on a date no
later than six months from the date of the notice of the
Offer, at a purchase price equal to the book value per Grant
Share of the Company as of the end of the Company's most
recent fiscal year.
(5) Notwithstanding any provision of this
Agreement, in no event may the Shareholder transfer or dispose
of any Grant Shares to an entity which competes directly or
indirectly with the Company or to any individual who is
affiliated or associated with such an entity.
6. Nondisclosure Agreement. (a) Executive, during the term of
employment under this Agreement, shall have access to and become familiar with
various trade secrets and proprietary and confidential information consisting
of, but not limited to, processes, computer programs, compilations of
information, records, sales procedures, customer requirements, pricing
techniques, customer lists, methods of doing business and other confidential
information (collectively referred to as the "Trade Secrets"), which are owned
by Company and regularly used in the operation of its business, but in
connection with which Company takes precautions to prevent dissemination to
persons other than certain directors, officers and employees. Executive
acknowledges and agrees that the Trade Secrets (1) are secret and not known in
the industry; (2) are entrusted to Executive after being informed of their
confidential and secret status by Company and because of the fiduciary position
occupied by Executive with Company; (3) have been developed by Company for and
on behalf of Company through substantial expenditures of time, effort and money
and are used in its business; (4) give Company an advantage over competitors
who do not know or use the Trade Secrets; (5) are of such value and nature as
to make it reasonable and necessary to protect and preserve the confidentiality
and secrecy of the Trade Secrets; and (6) the Trade Secrets are valuable,
special and unique assets of Company, the disclosure of which could cause
substantial injury and loss of profits and goodwill to Company.
8
<PAGE> 11
(b) Executive shall not use in any way or disclose any of the
Trade Secrets, directly or indirectly, either during the term of this Agreement
or at any time thereafter, except as required in the course of his employment
under this Agreement. All files, records, documents, information, data and
similar items relating to the business of Company, whether prepared by
Executive or otherwise coming into his possession, shall remain the exclusive
property of Company and shall not be removed from the premises of Company under
any circumstances without the prior written consent of the Board (except in the
ordinary course of business during Executive's period of active employment
under this Agreement), and in any event shall be promptly delivered to Company
upon termination of Executive's employment. Executive agrees that upon his
receipt of any subpoena, process or other request to produce or divulge,
directly or indirectly, any Trade Secrets to any entity, agency, tribunal or
person, Executive shall timely notify and promptly hand deliver a copy of the
subpoena, process or other request to the Chief Executive Officer of Company.
7. Inventions. Executive shall promptly disclose, grant and
assign to the Company for its sole use and benefit any and all inventions,
improvements, technical information and suggestions relating in any way to the
products of the Company or any of its affiliates or capable of beneficial use
by the Company or any of its affiliates, which Executive may conceive, develop
or acquire during the term hereof (whether or not during usual working hours),
together with all patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such invention,
improvement or technical information. In connection therewith, Executive shall
promptly at all times during and after the term hereof:
(a) Execute and deliver such applications, assignments,
descriptions and other instruments as may be necessary or proper in the opinion
of the Company to vest title to such inventions, improvements, technical
information, patent applications and patents or reissues thereof in the Company
and to enable it to obtain and maintain the entire right and title thereto
throughout the world.
(b) Render to the Company, at its expense, all such assistance as
it may require in the prosecution of applications for said patents or reissues
thereof, in the prosecution or defense of interferences which may be declared
involving any said application or patents, and in any litigation in which the
Company may be involved relating to any such patents, inventions, improvements
or technical information.
8. Nonsolicitation Agreement. Executive acknowledges and agrees
that the training he will receive, the experience he will gain while employed
and the information he will acquire regarding the Trade Secrets will enable him
to injure Company if he should compete with Company in a business that is
competitive with the business conducted or to be conducted by Company. For
these reasons, an in partial consideration for Executive's employment
hereunder, Executive hereby agrees that without the prior written consent of
Company, Executive shall not, directly or
9
<PAGE> 12
indirectly, either as an individual, a partner or a joint venturer, or in any
other capacity, nor shall he suffer or permit any related person or affiliate
to, during the term of his employment with the Company and, in the event that
this Agreement terminates by reason of Sections 2(a) or 2(d), for a period of
24 months thereafter,
(a) solicit any Customer (as hereinafter defined) of the Company
or its subsidiaries, assist any other person to do so, or have
any financial interest in any person which does so, if such
solicitation could result in the sale of any services to such
Customer and such sale is competitive with the business of the
Company and its subsidiaries as now carried on and as carried
on at the time of such sale; nor
(b) take any action inconsistent with the fiduciary relationship
of an employee to his employer.
As used in this Section 8 the term "Customer" shall mean customers of the
Company and its affiliates and any person or entity whose business the Company
or its affiliates is soliciting at such time.
As used in this Section 8 and in Section 9 of this Agreement, "affiliates"
shall mean persons or entities that directly, or indirectly through one or more
intermediaries, control or are controlled by, or are under common control with,
the Company.
9. Nonemployment Agreement. In partial consideration for
Executive's employment hereunder, Executive covenants and agrees that he will
not on his own behalf or on behalf of any other person, partnership,
association, corporation or other entity, at any time during the term of his
employment by the Company and, in the event that this Agreement terminates by
reason of Sections 2(a) or 2(d), for a period of 24 months thereafter,
(a) hire or solicit for employment any person who was employed by
the Company or its affiliates at the time the employment of
the Executive was terminated or within six months thereafter
or in any manner attempt to influence or induce any such
person(s) to leave the employment of Company or its
affiliates; nor
(b) use or disclose to any person, partnership, association,
corporation or other entity any information obtained while an
employee of Company concerning the names and addresses of
Company's employees.
10. Relocation. Executive acknowledges that the Company
intends to relocate the functional headquarters of the Company to the United
States at some future date. In the event that the Company requests Executive
to relocate to the
10
<PAGE> 13
United States in order to fulfill his obligations hereunder, Executive agrees
to relocate as necessary provided that the following conditions are met:
(a) Executive receives written notice of no less than 180 days;
(b) Executive is reimbursed for his reasonable moving costs (i.e.
a reasonable number of house hunting trips by Executive and
packing and moving expenses);
(c) Executive receives an adjustment to his base salary to the
extent that his cost of living increases as a result of such
relocation; and
(d) Executive and the Company shall resolve any issues with
respect to the sale of Executive's Ontario home in a mutually
satisfactory manner.
11. Director. The Company has caused Executive to be
elected as a director of the Company, to serve until his successor is elected
and qualified. During each election of directors of the Company during the
term of this Agreement, the Company shall nominate and use its reasonable best
efforts to cause the election of the Executive as a director of the Company.
12. Severability. The parties hereto intend all provisions of
Sections 8 and 9 hereof to be enforced to the fullest extent permitted by law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any provision of Sections 8 and 9 hereof is too broad to be enforced as
written, the parties intend that the court reform the provision to such
narrower scope as it determines to be reasonable and enforceable. In addition,
however, Executive agrees that the noncompetition agreements, nondisclosure
agreements and nonemployment agreements set forth above each constitute
separate agreements independently supported by good and adequate consideration
and shall be severable from the other provisions of, and shall survive, this
Agreement. The existence of any claim or cause of action of Executive against
Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of the covenants and
agreements of Executive contained in the noncompetition, nondisclosure or
nonemployment agreements. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
13. Affiliates. Executive will use his best efforts to ensure
that no relative of his or corporation of which he is an officer, director or
shareholder, or other affiliate
11
<PAGE> 14
of his, shall take any action that Executive could not take without violating
any provision of this Agreement.
14. Remedies. Executive recognizes and acknowledges that the
ascertainment of damages in the event of his breach of any provision of this
Agreement would be difficult, and Executive agrees that Company, in addition to
all other remedies it may have, shall have the right to injunctive relief if
there is such a breach.
15. Acknowledgements. Executive acknowledges and recognizes that
the enforcement of any of the nonsolicitation and nonemployment provisions in
this Agreement by Company will not interfere with Executive's ability to pursue
a proper livelihood. Executive recognizes and agrees that the enforcement of
this Agreement is necessary to ensure the preservation and continuity of the
business and good will of Company. Executive agrees that due to the nature of
Company's business, the nonsolicitation and nonemployment restrictions set
forth in Sections 8 and 9 of this Agreement are reasonable as to time.
16. Notices. Any notices, consents, demands, requests, approvals
and other communications to be given under this Agreement by either party to
the other shall be deemed to have been duly given if given in writing and
either (i) personally delivered or sent by mail, registered or certified,
postage prepaid with return receipt requested, or by recognized next day
delivery service, addressed as follows: (i) if to Company, c/o Cypress Capital
Corporation, One Galleria Tower, 13355 Noel Road, Suite 1650, Dallas, Texas
75240 or (ii) if to Executive, at his address as set forth on the payroll
records of Company. Notices delivered personally shall be deemed communicated
as of actual receipt; mailed notices shall be deemed communicated as of three
days after mailing.
17. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or written, between the parties hereto with respect to
the subject matter hereof and contains all of the covenants and agreements
between the parties with respect thereto.
18. Modification. No change or modification of this Agreement
shall be valid or binding upon the parties hereto, nor shall any waiver of any
term or condition in the future be so binding, unless such change or
modification or waiver shall be in writing and signed by the parties hereto.
19. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
20. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which shall constitute
one document.
12
<PAGE> 15
21. Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which he or it may be entitled.
22. Estate. If Executive dies prior to the expiration of the term
of employment, any monies that may be due him from Company under this Agreement
as of the date of his death shall be paid to his estate.
23. Assignment. Company shall have the right to assign this
Agreement to its successors or assigns. The terms "successors" and "assigns"
shall include any person, corporation, partnership or other entity that buys
all or substantially all of Company's assets or all of its stock, or with which
Company merges or consolidates. The rights, duties and benefits to Executive
hereunder are personal to him, and no such right or benefit may be assigned by
him.
24. Binding Effect. This Agreement shall be binding upon the
parties hereto, together with their respective executors, administrators,
successors, personal representatives, heirs and permitted assigns.
25. Waiver of Breach. The waiver by Company of a breach of any
provision of this Agreement by Executive shall not operate or be construed as a
waiver of any subsequent breach by Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
Parcelway Systems Holding Corp. and its
wholly owned subsidiaries
By: /s/ Stephen P. Smiley
------------------------------------
EXECUTIVE:
/s/ Richard K. McClelland
----------------------------------------
Richard K. McClelland
13
<PAGE> 1
EXHIBIT 10.8
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 5, 1996
by and among
DYNAMEX INC.
as Borrower
and
PARCELWAY COURIER SYSTEMS CANADA LTD.
PARCELWAY COURIER SYSTEMS (B.C.) LTD.
DYNAMEX OPERATIONS EAST, INC.
DYNAMEX OPERATIONS WEST, INC.
ACTION DELIVERY AND MESSENGER SERVICE (1996) LIMITED
SEIDEL ENTERPRISES, INC.
NOW COURIER, INC.
SEKO ENTERPRISES, INC.
YS CORPORATION
ATTENTION MESSENGER SERVICE OF ILLINOIS, INC.
SOUTHBANK COURIER INC.
K.H.B. & ASSOCIATES LTD.
and
ZIPPER TRANSPORTATION SERVICES LTD.
as Guarantors
and
NATIONSBANK OF TEXAS, N.A.
as Agent
and
THE LENDERS NAMED HEREIN
$40,000,000 REVOLVING CREDIT/TERM LOAN FACILITY
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 1.3 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 1.4 Financial Covenants and Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 2 - Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.3 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.5 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.6 Optional Prepayments, Conversions and Continuations of Loans . . . . . . . . . . . . . . . 30
Section 2.7 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.8 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.9 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.12 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.13 Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.14 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 3 - Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.1 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.2 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.3 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.4 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.5 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.6 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 4 - Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.1 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.2 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.4 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.7 Additional Interest on Eurodollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 5 - Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.2 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.3 New Subsidiaries; New Issuances of Capital Stock . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.4 New Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.5 Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.6 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 6 - Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.1 Initial Extension of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.2 All Extensions of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.3 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 7 - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.3 Corporate Action; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.4 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.5 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.6 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.7 Rights in Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.8 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.9 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.10 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.12 Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.13 ERISA; Canadian Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.15 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.16 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.18 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.19 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.21 Labor Disputes and Acts of God . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.22 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.24 Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.25 Related Transactions Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.26 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.27 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.28 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.29 Common Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 8 - Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.2 Maintenance of Existence Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 64
Section 8.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 8.4 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 8.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 8.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 8.7 Keeping Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.11 ERISA; Canadian Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.12 Trade Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.13 Unified Cash Management System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.14 Indemnifications under Acquisition Documents . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.15 Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.16 Use of Proceeds of the Dynamex IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 9 - Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 9.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 9.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 9.3 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 9.4 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 9.5 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 9.6 Limitation on Issuance of Capital Stock of Subsidiaries . . . . . . . . . . . . . . . . . . 73
Section 9.7 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9.8 Disposition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9.9 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.10 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.11 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.12 Intercompany Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.13 Modification of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.14 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.15 ERISA and Canadian Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 10 - Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.1 Ratio of Senior Funded Debt to EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.2 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.3 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE 11 - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 11.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 11.3 Performance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 11.4 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 11.5 Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE 12 - The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 12.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 12.2 Rights of Agent as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 12.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 12.4 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.5 Independent Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.6 Several Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 12.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE 13 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 13.2 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 13.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 13.4 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 13.5 No Fiduciary Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 13.6 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 13.7 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 13.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 13.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 13.10 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 13.11 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 13.12 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 13.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 13.14 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 13.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.19 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.20 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.21 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.22 Approvals and Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 13.23 Agent for Services of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 13.24 Joint and Several Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 13.25 Supplements to Certain Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 13.26 Amendment and Restatement of Existing Agreement . . . . . . . . . . . . . . . . . . . . . . 95
</TABLE>
iv
<PAGE> 6
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibit Section
- ------- ---------------------- -------
<S> <C> <C>
A Form of Assignment and Acceptance 1.1
B Form of Note 1.1 and 2.2
C Form of Notice of Borrowings, Conversions,
Continuations or Prepayments 2.9
D Compliance Certificate 8.1(c)
</TABLE>
INDEX TO SCHEDULES
<TABLE>
<CAPTION>
Schedule Description of Schedule
- -------- -----------------------
<S> <C>
1.1(a) Permitted Liens
1.1(b) Pro Formas
1.1(c) Projections
7.4 Permits, Franchises, Licenses and Authorizations required by Governmental Requirements or
issued by Governmental Authorities
7.6 Litigation and Judgments
7.7(a) Ownership of Real Properties or Interests therein
7.7(b) Ownership of Intellectual Property
7.10 Existing Debt
7.11 Taxes
7.13 Plans
7.15 Capitalization of New Loan Parties
7.22 Material Contracts
7.23 Bank Accounts
7.25 Certain Approvals and Consents
7.27 Employee Matters
7.28 Insurance
9.5 Investments
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 5, 1996,
is by and among DYNAMEX INC. (f/k/a Parcelway Systems Holdings Corp., the
"Borrower"), a Delaware corporation, PARCELWAY COURIER SYSTEMS CANADA LTD.
("Parcelway Canada"), an Alberta (Canada) corporation, PARCELWAY COURIER
SYSTEMS (B.C.) LTD. ("Parcelway BC"), a British Columbia (Canada) corporation,
DYNAMEX OPERATIONS EAST, INC. ("Dynamex East"), a Delaware corporation, DYNAMEX
OPERATIONS WEST, INC. ("Dynamex West"), a Delaware corporation, each of the
banks or other lending institutions which is a party hereto (as evidenced by
the signature pages of this Agreement) or which may from time to time become a
party hereto or any successor or assignee thereof (individually, a "Lender"
and, collectively, the "Lenders"), and NATIONSBANK OF TEXAS, N.A., a national
banking association, as agent for itself and the other Lenders (in such
capacity, together with its successors in such capacity, the "Agent") and,
effective as of the Funding Date (as defined herein), ACTION DELIVERY AND
MESSENGER SERVICE (1996) LIMITED ("Action Delivery"), a Nova Scotia (Canada)
corporation (unless such corporation has been wound-up with and into Parcelway
Canada on or before the Funding Date), SEIDEL ENTERPRISES, INC. ("Seidel
Delivery"), an Ohio corporation, NOW COURIER, INC. ("Now Courier"), an Ohio
corporation, SEKO ENTERPRISES, INC. ("Seko"), an Illinois corporation, YS
CORPORATION ("YS"), an Illinois corporation, ATTENTION MESSENGER SERVICE OF
ILLINOIS, INC. ("Attention Messenger"), an Illinois corporation, SOUTHBANK
COURIER INC. ("Southbank Courier"), a New York corporation, K.H.B. & ASSOCIATES
LTD. ("KHB"), a Manitoba (Canada) corporation (unless such corporation has been
wound-up with and into Parcelway Canada on or before the Funding Date), and
ZIPPER TRANSPORTATION SERVICES LTD. ("Zipper"), a Manitoba (Canada)
corporation (unless such corporation has been wound-up with and into Parcelway
Canada on or before the Funding Date).
RECITALS:
a. The Borrower owns all of the issued and
outstanding Capital Stock of Parcelway Canada,
Dynamex East and Dynamex West, and Parcelway Canada
owns all of the issued and outstanding Capital Stock
of Parcelway BC.
b. The Borrower, Parcelway Canada, Dynamex East
and Dynamex West previously entered into the Mayne
Nickless Acquisition Agreement (as defined herein)
pursuant to which Parcelway Canada, Dynamex East and
Dynamex West previously acquired certain of the
assets and assumed certain of the liabilities of the
Mayne Nickless Sellers (as defined herein).
c. Pursuant to that certain Credit Agreement
dated as of December 15, 1996, by and among Dynamex,
Parcelway Canada, Parcelway BC, Dynamex East, Dynamex
West, Parcelway Courier (which corporation was
previously merged with and into Dynamex West),
Parcelway International (which corporation was
previously merged with and into Dynamex West),
Parcelway Illinois (which corporation was previously
merged with and into Dynamex West), Parcelway III
(which corporation was previously merged with and
into Dynamex West), NationsBank, individually as a
Lender and as Agent (the "Existing Agreement"),
<PAGE> 8
NationsBank extended (i) a $2,500,000 revolving
credit loans facility to the Borrower, Dynamex East,
Dynamex West, Parcelway Courier, Parcelway
International, Parcelway Illinois and Parcelway III
to provide working capital for, and other funds for
the general corporate purposes of, such corporations,
(ii) an $8,000,000 term loan facility to the
Borrower, Dynamex East and Dynamex West to partially
finance the acquisition of assets by Dynamex East and
Dynamex West pursuant to the Mayne Nickless
Acquisition and to repay certain indebtedness of
certain Subsidiaries of the Borrower, and (iii) a
$6,000,000 term loan facility to Parcelway Canada to
partially finance its acquisition of assets pursuant
to the Mayne Nickless Acquisition and to repay
certain indebtedness of Parcelway Canada.
d. The Borrower previously entered into (i) the
Action Delivery Acquisition Agreement (as defined
herein)pursuant to which Parcelway Canada intends to
acquire all Capital Stock of Action Delivery, (ii)
the Seidel Delivery Acquisition Agreement (as defined
herein) pursuant to which the Borrower intends to
acquire all of the Capital Stock of Seidel Delivery
and Now Courier, (iii) the Seko/Metro Acquisition
Agreement (as defined herein) pursuant to which the
Borrower intends to acquire all of the Capital Stock
of Seko, YS and Attention Messenger, (iv) the
Southbank Acquisition Agreement pursuant to which the
Borrower intends to acquire all of the Capital Stock
of Southbank Courier, and (v) the Zipper Acquisition
Agreement pursuant to which Parcelway Canada intends
to acquire all of the Capital Stock of KHB and
(indirectly through KHB) Zipper, all of which
acquisitions are anticipated to be consummated
concurrently with the Dynamex IPO (as defined
herein), other than the Action Delivery Acquisition
which may be consummated prior thereto.
e. The Borrower intends to consummate an initial
public offering of its shares of common stock in the
immediate future, a portion of the proceeds of which
(together with the proceeds of any Loans advanced
under this Agreement concurrently with such
consummation) shall be used to pay the Existing Loans
in full.
f. The Borrower and its Subsidiaries, the
Lenders identified on the signature pages of this
Agreement and the Agent desire to enter into this
Agreement for the purposes of, among other things and
concurrently with the consummation of the Dynamex IPO
and satisfaction of the other conditions to the
funding of the initial Loan under this Agreement,
amending and restating the Existing Agreement
effective as of the Funding Date and providing a
$40,000,000 revolving credit/term loan facility to
the Borrower which may be used (i) to pay the
Existing Loans and existing subordinated indebtedness
in full, (ii) to finance capital expenditures and
permitted acquisitions by the Borrower and its
Subsidiaries, and (iii) to provide working capital
for, and other funds for the general corporate
purposes of, the Borrower and its Subsidiaries.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
2
<PAGE> 9
ARTICLE 1
Definitions
Section 1.1 Definitions, etc. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Agreements" means the Dynamex Acquisition Agreement, the
Mayne Nickless Acquisition Agreement, the Action Delivery Acquisition
Agreement, the Seidel Delivery Acquisition Agreement, the Seko/Metro
Acquisition Agreement, the Southbank Courier Acquisition Agreement and the
Zipper Acquisition Agreement.
"Acquisition Documents" means the Acquisition Agreements and each
other material agreement, document or instrument executed or delivered in
connection with or pursuant to any Acquisition Agreement.
"Acquisitions" means the Dynamex Acquisition, the Mayne Nickless
Acquisition, the Action Delivery Acquisition, the Seidel Delivery Acquisition,
the Seko/Metro Acquisition, the Southbank Courier Acquisition and the Zipper
Acquisition.
"Action Delivery" means as specified in the introductory paragraph of
this Agreement.
"Action Delivery Acquisition" means the acquisition by Parcelway
Canada of the Capital Stock of Action Delivery pursuant to the Action Delivery
Acquisition Agreement.
"Action Delivery Acquisition Agreement" means that certain Agreement
dated as of June 20, 1996, among Nancy Smithers, David Nantau, Naturally Nova
Scotia Health Products Limited, 2306080 Nova Scotia Limited, the Borrower and
Action Delivery in the form previously submitted to and approved by the Agent,
and any and all amendments, modifications, supplements, renewals, extensions or
restatements thereof.
"Additional Costs" means as specified in Section 4.1(a).
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of one percent) determined by the Agent to be equal to (a) the
Eurodollar Rate for such Eurodollar Loan for such Interest Period divided by
(b) one minus the Reserve Requirement for such Eurodollar Loan for such
Interest Period.
"Affiliate" means, as to any Person (or, with respect to clause (d)
succeeding, as to the Borrower) any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds ten percent or more of any class of voting Capital
Stock of such Person; (c) except as provided in clause (d) succeeding, ten
percent or more of the voting Capital Stock of which is directly or indirectly
beneficially owned or held by the Person in question; or (d) with respect to
the Borrower after the consummation of the Dynamex IPO, 20% or more of the
voting Capital Stock of which is directly or indirectly beneficially owned or
held
3
<PAGE> 10
by the Person in question. The term "control" means the possession, directly
or indirectly, of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise; provided, however, in no event shall the Agent or any
Lender be deemed an Affiliate of the Borrower or any of its Subsidiaries.
"Agent" means as specified in the introductory paragraph of this
Agreement.
"Agent's Letter" means that certain letter agreement dated as of July
5, 1996 (and accepted by the Borrower as of July 5, 1996) between the Agent and
the Borrower.
"Agreement" means this Agreement and any and all amendments,
modifications, supplements, renewals, extensions or restatements hereof.
"Air Canada" means Air Canada, a corporation existing under the
federal laws of Canada.
"Air Canada Subordinated Debt" means the Debt evidenced by the Air
Canada Subordinated Note.
"Air Canada Subordinated Note" means that certain Subordinated Renewal
Promissory Note dated December 29, 1995, in the original principal amount of
Cdn. $3,225,000 made by the Borrower payable to Air Canada, and any and all
amendments, modifications, supplements, renewals, extensions or restatements
thereof.
"Applicable Lending Office" means for each Lender and each Type of
Loan, the Lending Office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan below its name on the signature pages hereof
(or, with respect to a Lender that becomes a party to this Agreement pursuant
to an assignment made in accordance with Section 13.8, in the Assignment and
Acceptance executed by it) or such other office of such Lender (or an Affiliate
of such Lender) as such Lender may from time to time specify to the Borrower
and the Agent as the office by which its Loans of such Type are to be made and
maintained.
"Applicable Margin" means, for the period commencing with the Funding
Date and thereafter, the rate per annum set forth in the table below that
corresponds to the ratio of (i) Senior Funded Debt as of the date of the
relevant financial statements referred to below to (ii) EBITDA for the four
fiscal quarters of the Borrower and its Subsidiaries then most recently ended
as of the date of such financial statements or, if EBITDA is calculated as of
the end of any fiscal quarter ended prior to January 31, 1997, for the period
consisting of the greatest number of fiscal quarters ended subsequent to the
Funding Date on an annualized basis:
4
<PAGE> 11
<TABLE>
<CAPTION>
Loans Outstanding Loans Outstanding
During the Revolving Period During the Term Period
Applicable Margins for Applicable Margins for
Ratio of Senior Prime Eurodollar Prime Rate Eurodollar
----- ---------- ---------- ----------
Funded Debt to EBITDA Rate Loans Loans Loans Loans
--------------------- ---------- ----- ----- -----
<S> <C> <C> <C> <C>
Less than 1.50 to 1.00 0% 1.25% 0% 1.50%
Less than 2.00 to 1.00 but greater 0% 1.50% 0% 1.75%
than or equal to 1.50 to 1.00
Greater than or equal to 2.00 to 0% 1.75% 0% 2.00%
1.00
</TABLE>
For purposes hereof, the Applicable Margin for the period from the Funding Date
to the first Calculation Date shall be deemed to be the percentage reflected in
the preceding table as if the ratio of Senior Funded Debt to EBITDA were less
than 1.50 to 1.00 and shall thereafter be calculated on each Calculation Date
based upon the financial statements delivered by the Borrower pursuant to
Section 8.1(b) and the certificate delivered by the Borrower pursuant to
Section 8.1(e); provided, that if the Borrower fails to deliver to the Agent
such financial statements or certificate on or before the relevant Calculation
Date, the Applicable Margin shall be deemed to be the percentage reflected in
the preceding table as if the ratio of Senior Funded Debt to EBITDA were
greater than or equal to 2.00 to 1.00 until the date such statements and
certificate are received by the Agent, after which the Applicable Margin shall
be determined as otherwise provided herein.
"Asset Disposition" means the disposition of any or all of the
Property (other than sales of Inventory in the ordinary course of business and
the grant of a Lien as security) of the Borrower or any of its Subsidiaries,
whether by sale, lease, transfer, assignment, condemnation or otherwise, but
excluding any involuntary disposition resulting from casualty damage to
Property.
"Assignee" means as specified in Section 13.8(b).
"Assigning Lender" means as specified in Section 13.8(b).
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and its Assignee and accepted by the Agent pursuant to Section
13.8(e), in substantially the form of Exhibit A hereto.
"Attention Messenger" means as specified in the introductory paragraph
of this Agreement.
"Bankruptcy Code" means as specified in Section 11.1(e).
"Basle Accord" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988,
5
<PAGE> 12
as amended, supplemented and otherwise modified and in effect from time to
time, or any replacement thereof.
"Borrower" means as specified in the initial paragraph of this
Agreement.
"Business Day" means (a) any day on which commercial banks are not
authorized or required to close in Dallas, Texas, and (b) with respect to all
borrowings, payments, Conversions, Continuations, Interest Periods and notices
in connection with Eurodollar Loans, any day which is a Business Day described
in clause (a) above and which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Calculation Date" means the date occurring each quarter during the
term of this Agreement which is 15 days after the date on which quarterly
financial statements of the Borrower and its Subsidiaries are required by
Section 8.1(b) to be delivered to the Agent.
"Canadian Pension Authority" means any federal or provincial pension
regulator having jurisdiction over any Canadian Pension Plan.
"Canadian Pension and Benefits Law" means any federal or provincial
legislation or regulations applicable to any Canadian Plan including, without
limitation, any pension benefits or tax legislation or regulations.
"Canadian Pension Plan" means any pension or retirement plan, written
or unwritten, registered or unregistered, maintained or contributed to for any
Canadian employee or former employee of Parcelway Canada or any other Loan
Party currently or at any time within the six years immediately preceding the
Closing Date.
"Canadian Plan" means any pension, retirement, profit sharing, stock
option, stock purchase, stock bonus, severance, bonus, incentive, deferred
compensation, supplemental unemployment, health, welfare, dental, disability,
life insurance or other plan, program or arrangement maintained for any
Canadian employee of Parcelway Canada or any other Loan Party, including any
Canadian Pension Plan.
"Capital Expenditures" means, for any period, expenditures (including
the aggregate amount of Capital Lease Obligations incurred during such period)
made by the Borrower or any of its Subsidiaries to acquire or construct fixed
assets, plant or equipment (including renewals, improvements or replacements,
but excluding repairs) during such period and which, in accordance with GAAP,
are classified as capital expenditures.
"Capital Lease Obligations" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal Property, which
obligations are classified as a capital lease on a balance sheet of such Person
under GAAP. For purposes of this Agreement, the amount of such Capital Lease
Obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
6
<PAGE> 13
"Capital Stock" means corporate stock and any and all shares,
partnership interests, limited partnership interests, limited liability company
interests, membership interests, equity interests, participations, rights or
other equivalents (however designated) of corporate stock or any of the
foregoing issued by any entity (whether a corporation, a partnership or another
entity).
"Cdn. Dollars" and "Cdn. $" mean lawful money of Canada.
"Closing Date" means July 5, 1996, the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" means all Property of any nature whatsoever upon which a
Lien is created or purported to be created by any Loan Document as security for
the Obligations or any portion thereof.
"Commitment" means, as to any Lender, the obligation of such Lender to
make or continue Loans and incur or participate in Letter of Credit Liabilities
hereunder in an aggregate principal amount at any one time outstanding up to
but not exceeding the amount set forth opposite the name of such Lender on the
signature pages hereto under the heading "Commitment" or, if such Lender is a
party to an Assignment and Acceptance, the amount of the "Commitment" set forth
in the most recent Assignment and Acceptance of such Lender, as the same may be
reduced or terminated pursuant to Section 2.13 or 11.2, and "Commitments" means
such obligations of all Lenders. As of the Closing Date, the aggregate
principal amount of the Commitments is $40,000,000.
"Commitment Percentage" means, as to any Lender, the percentage
equivalent of a fraction, the numerator of which is the amount of the
outstanding Commitment of such Lender (or, if such Commitment has terminated or
expired, the outstanding principal amount of the Loans and Letter of Credit
Liabilities of such Lender) and the denominator of which is the aggregate
amount of the outstanding Commitments of all Lenders (or, if such Commitments
have terminated or expired, the aggregate outstanding principal amount of the
Loans and Letter of Credit Liabilities of all Lenders), as adjusted from time
to time in accordance with Section 13.8.
"Concentration Account" means a concentration deposit account into
which all proceeds of Collateral shall be deposited maintained by the Borrower
or its Subsidiaries (as applicable) with a bank selected by the Borrower or
such Subsidiary and reasonably acceptable to the Agent, and "Concentration
Accounts" means all of such Concentration Accounts.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.6 of a Eurodollar Loan as a Eurodollar Loan
of the same Type from one Interest Period to the next Interest Period.
"Contract Rate" means as specified in Section 13.12(a).
7
<PAGE> 14
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.6 or Article 4 of one Type of Loan into the other Type of
Loan.
"Currency Hedge Agreement" means any currency hedge or exchange
agreement, option or futures contract or other agreement intended to protect
against or manage a Person's exposure to fluctuations in currency exchange
rates.
"Current Date" means a date occurring no more than 30 days prior to
(a) (i) the Closing Date or (ii) with respect to the New Loan Parties, the
Funding Date or (b) such earlier date which is acceptable to the Agent.
"Cypress" means Cypress Capital Partners I, L.P., a Texas limited
partnership.
"Debt" means as to any Person at any time (without duplication): (a)
all indebtedness, liabilities and obligations of such Person for borrowed
money, (b) all indebtedness, liabilities and obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (c) all
indebtedness, liabilities and obligations of such Person to pay the deferred
purchase price of Property or services, except trade accounts payable of such
Person arising in the ordinary course of business that are not past due by more
than 90 days, (d) all Capital Lease Obligations of such Person, (e) all Debt of
others Guaranteed by such Person, (f) all indebtedness, liabilities and
obligations secured by a Lien existing on Property owned by such Person,
whether or not the indebtedness, liabilities or obligations secured thereby
have been assumed by such Person or are non-recourse to such Person, (g) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments, (h) all indebtedness, liabilities and obligations of such
Person to redeem or retire shares of Capital Stock of such Person, (i) all
indebtedness, liabilities and obligations of such Person under Interest Rate
Protection Agreements or Currency Hedge Agreements, and (j) all indebtedness,
liabilities and obligations of such Person in respect of unfunded vested
benefits under any Plan or Canadian Plan.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means, in respect of any principal of any Loan, any
Reimbursement Obligation or any other amount payable by the Borrower under this
Agreement or any other Loan Document which is not paid when due (whether at
stated maturity, by acceleration or otherwise), a rate per annum during the
period commencing on the due date until such amount is paid in full equal to
the lesser of (a) the sum of four percent plus the Prime Rate as in effect from
time to time plus the Applicable Margin for Prime Rate Loans or (b) the Maximum
Rate; provided, however, that if such amount in default is principal of a
Eurodollar Loan and the due date is a day other than the last day of an
Interest Period therefor, the "Default Rate" for such principal shall be, for
the period from and including the due date and to but excluding the last day of
the Interest Period therefor, the lesser of (i) the sum of four percent plus
the interest rate for such Eurodollar Loan for such Interest Period as provided
in Section 2.4(a) hereof or (ii) the Maximum Rate and, thereafter, the rate
provided for above in this definition.
8
<PAGE> 15
"Deposit Account" means a deposit account maintained by the Borrower
with a bank selected by the Borrower and reasonably acceptable to the Agent.
"Dollars" and "$" mean lawful money of the U.S.
"Dynamex Acquisition" means the acquisition by Parcelway Canada of the
assets of Dynamex Express Inc. from Air Canada in May 1995.
"Dynamex Acquisition Agreement" means the Asset Purchase Agreement
relating to the Dynamex Acquisition.
"Dynamex Common Stock" means the common stock of the Borrower, par
value $0.01 per share.
"Dynamex East" means as specified in the introductory paragraph of
this Agreement.
"Dynamex IPO" means an initial public offering of shares of Dynamex
Common Stock which directly results in net cash proceeds to the Borrower of
$27,000,000 or more.
"Dynamex West" means as specified in the introductory paragraph of
this Agreement.
"EBIT" means, for any period, without duplication, the sum of the
following for the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP: (a) Net Income, plus (b) Interest
Expense, plus (c) income and franchise taxes to the extent deducted in
determining Net Income, plus (d) non- cash items, other than depreciation and
amortization expense, to the extent deducted in determining Net Income, minus
(e) non-cash income to the extent included in determining Net Income.
"EBITDA" means, for any period, without duplication, the sum of the
following for the Borrower and its Subsidiaries (or other applicable Person)
for such period determined on a consolidated basis in accordance with GAAP: (a)
Net Income, plus (b) Interest Expense, plus (c) income and franchise taxes to
the extent deducted in determining Net Income, plus (d) depreciation and
amortization expense and other non-cash items to the extent deducted in
determining Net Income, minus (e) non-cash income to the extent included in
determining Net Income.
"Eligible Assignee" means (a) any Affiliate of a Lender or (b) any
commercial bank, savings and loan association, savings bank, finance company,
insurance company, pension fund, mutual fund or other financial institution
(whether a corporation, partnership or other entity) acceptable to the Agent.
"Environmental Law" means any federal, state, provincial, local or
foreign law, statute, code or ordinance, principle of common law, rule or
regulation, as well as any Permit, order, decree, judgment or injunction
issued, promulgated, approved or entered thereunder, relating to pollution or
the protection, cleanup or restoration of the environment or natural resources,
or to the public health or safety, or otherwise governing the generation, use,
handling, collection, treatment, storage, transportation, recovery, recycling,
discharge or
9
<PAGE> 16
disposal of Hazardous Materials, including, without limitation as to U.S. laws,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601 et seq., the Superfund Amendment and
Reauthorization Act of 1986, 99-499, 100 Stat. 1613, the Resource Conservation
and Recovery Act of 1976, 42 U. S. C. Section 6901 et seq., the Occupational
Safety and Health Act, 29 U S.C. Section 651 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Clean Water Act, 33 U. S. C. Section 1251 et
seq., the Emergency Planning and Community Right to Know Act, 42 U. S. C.
Section 11001 et seq., the Federal Insecticide, Fungicide and Rodenticide Act,
7 U.S.C. Section 136 et seq., and the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., and any state or local counterparts.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability or criminal, penal or civil statute, including,
without limitation, any Environmental Law, Permit, order or agreement with any
Governmental Authority or other Person, arising from environmental, health or
safety conditions or the Release or threatened Release of a Hazardous Material
into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is
a member of a group of entities, organizations or employers of which a Loan
Party is also a member and which is treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the Code.
"Eurodollar Loans" means Loans that bear interest at rates based upon
the Eurodollar Rate and the Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted by the Reference Lender at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) two Business Days prior to
the first day of such Interest Period for the offering by the Reference Lender
to leading banks in the London interbank market of Dollar deposits in
immediately available funds having a term comparable to such Interest Period
and in an amount comparable to the principal amount of the Eurodollar Loan made
by the Reference Lender to which such Interest Period relates. If the
Reference Lender is not participating in any Eurodollar Loans during any
Interest Period therefor (whether as a result of Section 4.4 or for any other
reason), the Eurodollar Rate and the Adjusted Eurodollar Rate for such Loans
for such Interest Period shall be determined by reference to the amount of the
Loans which the Reference Lender would have made had it been participating in
such Loans.
"Event of Default" has the meaning specified in Section 11.1.
10
<PAGE> 17
"Excess Insurance Proceeds" means any and all proceeds of any
Insurance Recovery which the Borrower or its Subsidiary (as applicable) (a) has
elected to not apply to the repair, construction or replacement of the Property
affected or to the purchase of other, similar Property for use in its business
or (b) has not both (i) elected to apply to the repair, construction or
replacement of the Property affected or to the purchase of other, similar
Property for use in its business within 90 days of the event giving rise to the
Insurance Recovery and (ii) actually applied to such repair, construction,
replacement or purchase (A) within 180 days after the earliest to occur of the
receipt of such proceeds by the Borrower, any of its Subsidiaries or the Agent,
with respect to an Insurance Recovery relating to other than real Property, or
(B) commencing within 180 days after the earliest to occur of the receipt of
such proceeds by the Borrower, any of its Subsidiaries or the Agent and
continuing in a reasonably prompt and diligent fashion thereafter, with respect
to an Insurance Recovery relating to real Property.
"Existing Agreement" means as specified in Recital C of this
Agreement.
"Existing Loans" means the "Loans" as such term is defined in the
Existing Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest one- sixteenth of one percent (1/16 of
1%)) equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if
such rate is not so published on such next succeeding Business Day, the Federal
Funds Rate for any day shall be the average rate which would be charged to the
Reference Lender on such day on such transactions as determined by the Agent.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
the sum of the following (without duplication) for the Borrower and its
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP: (i) Net Income, plus (ii) income and franchise taxes to the extent
deducted in determining Net Income, plus (iii) operating lease expenses, plus
(iv) rent expenses, plus (v) Interest Expense, to (b) the Fixed Charges of the
Borrower and its Subsidiaries for such period.
"Fixed Charges" means, for any period, the sum of the following for
the Borrower and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP: (a) Interest Expense, plus (b) operating lease
expenses, plus (c) rent expenses.
"Funded Debt" means, at any particular time, all Debt of the Borrower
and its Subsidiaries, exclusive of (i) Debt referred to in clauses (e) and (j)
of the definition of such term, (ii) Debt referred to in clause (f) of the
definition of such term if and to the extent that such Debt is non-recourse to
the Borrower and its Subsidiaries, and (iii) Debt referred to in
11
<PAGE> 18
clause (g) of the definition of such term if and to the extent that such Debt
is contingent in nature to the Borrower and its Subsidiaries.
"Funding Date" means the date upon which (a) all conditions precedent
to the making of the initial Loans under Article 6 of this Agreement are
satisfied and (b) the initial Loans are funded by the Lenders under this
Agreement, which date shall be the date (if any) of consummation of the Dynamex
IPO.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their respective successors
and which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "consistent basis" when the accounting
principles applied in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state,
provincial or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Requirement" means any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, Permit,
certificate, license, authorization or other directive or requirement of any
federal, state, county, municipal, parish, provincial or other Governmental
Authority or any department, commission, board, court, agency or any other
instrumentality of any of them.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any indebtedness, liability or obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or- pay
or to maintain financial statement conditions or otherwise) or (b) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other indebtedness, liability or obligation as to the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning. The amount of any Guarantee shall be deemed
to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee is made or, if not stated or
determinable, the maximum anticipated liability in respect thereof (assuming
such Person is required to perform thereunder).
"Guaranties" means the Guaranty Agreements in form and substance
satisfactory to the Agent executed by each of the Subsidiaries of the Borrower
and any other Loan Party (one executed by each such Loan Party), dated the
Closing Date or the Funding Date (with respect to the New Loan Parties) or a
subsequent date (with respect to Subsidiaries acquired after the
12
<PAGE> 19
Funding Date), in favor of the Agent for the benefit of the Agent and the
Lenders, and any Guaranty Agreement executed pursuant to Section 5.3 hereof,
and any and all amendments, modifications, supplements, renewals, extensions or
restatements thereof.
"Hazardous Material" means any substance, product, liquid, waste,
pollutant, chemical, contaminant, insecticide, pesticide, gaseous or solid
matter, organic or inorganic matter, fuel, micro-organisms, ray, odor,
radiation, energy, vector, plasma, constituent or material which (a) is or
becomes listed, regulated or addressed under any Environmental Law or (b) is,
or is deemed to be, alone or in any combination, hazardous, hazardous waste,
toxic, a pollutant, a deleterious substance, a contaminant or a source of
pollution or contamination under any Environmental Law, including, without
limitation, asbestos, petroleum, underground storage tanks (whether empty or
containing any substance) and polychlorinated biphenyls.
"Insurance Recovery" means, with respect to any Property of the
Borrower or any of its Subsidiaries and any single occurrence or related
occurrences with respect thereto, the receipt or constructive receipt by the
Borrower or any of such Subsidiaries, or the payment by an insurance company to
the Agent, of proceeds of any such Property or casualty insurance in an amount
or aggregate amount (as applicable) in excess of $25,000.
"Intellectual Property" means any U.S., Canadian or foreign patents,
patent applications, trademarks, trade names, service marks, brand names, logos
and other trade designations (including unregistered names and marks),
trademark and service mark registrations and applications, copyrights and
copyright registrations and applications, inventions, invention disclosures,
protected formulae, formulations, processes, methods, trade secrets, computer
software, computer programs and source codes, manufacturing research and
similar technical information, engineering know-how, customer and supplier
information, assembly and test data drawings or royalty rights.
"Interest Expense" means, for any period, all interest on Debt of the
Borrower and its Subsidiaries (or other applicable Person) paid or accrued
during such period, including the interest portion of payments under Capital
Lease Obligations; provided, however, for purposes of determining compliance
with the financial covenants set forth in Section 10.2, Interest Expense (in
computing Fixed Charges) shall exclude interest payable in kind or in other
securities of the obligor other than cash or cash equivalents.
"Interest Period" means, with respect to any Eurodollar Loan, each
period commencing on the date such Loan is made or Converted from a Prime Rate
Loan or (if Continued) the last day of the next preceding Interest Period with
respect to such Loan, and ending on the numerically corresponding day in the
first, third or sixth calendar month thereafter, as the Borrower may select as
provided in Section 2.9 hereof, except that each such Interest Period which
commences on the last Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (a) each Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the next succeeding Business Day (or, if such succeeding Business Day falls
in the next succeeding calendar month, on the next preceding Business Day); (b)
any
13
<PAGE> 20
Interest Period which would otherwise extend beyond the Maturity Date shall end
on the Maturity Date; (c) no more than five Interest Periods for Eurodollar
Loans shall be in effect at the same time; (d) no Interest Period shall have a
duration of less than one month and, if the Interest Period for any Eurodollar
Loans would otherwise be a shorter period, such Loans shall not be available
hereunder; and (e) no Interest Period for a Term Loan may commence before and
end after any principal repayment date unless, after giving effect thereto, the
aggregate principal amount of the Eurodollar Loans having Interest Periods that
end after such principal payment date shall be equal to or less than the amount
of the applicable Term Loans scheduled to be outstanding hereunder after such
principal payment date.
"Interest Rate Protection Agreements" means, with respect to any
Person, an interest rate swap, cap or collar agreement or similar arrangement
between such Person and one or more Lenders that are parties to this Agreement
providing for the transfer or mitigation of interest rate risks either
generally or under specified contingencies.
"Inventory" means all inventory now owned or hereafter acquired by the
Borrower or any of its Subsidiaries wherever located and whether or not in
transit, which is or may at any time be held for sale or lease, or furnished
under any contract (exclusive of leases of real Property) for service or held
as raw materials, work in process, or supplies or materials used or consumed in
the business of the Borrower or any of its Subsidiaries.
"Investments" means as specified in Section 9.5.
"Issuing Bank" means NationsBank or such other Lender which is a
commercial bank as the Borrower and NationsBank may mutually designate from
time to time which agrees to be the issuer of such Letter of Credit.
"KHB" means as specified in the introductory paragraph of this
Agreement.
"Lender" and "Lenders" means as specified in the initial paragraph of
this Agreement.
"Letter of Credit" means any standby letter of credit issued by the
Issuing Bank for the account of the Borrower pursuant to the Existing Agreement
or this Agreement.
"Letter of Credit Agreement" means, with respect to each Letter of
Credit to be issued by the Issuing Bank therefor, the letter of credit
application and reimbursement agreement which such Issuing Bank requires to be
executed by the Borrower in connection with the issuance of such Letter of
Credit.
"Letter of Credit Liabilities" means, at any time, the aggregate
undrawn face amount of all outstanding Letters of Credit and all unreimbursed
drawings under Letters of Credit.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation or other encumbrance of any
kind or nature whatsoever (including, without limitation, any conditional sale
or title retention agreement), whether arising by contract, operation of law or
otherwise.
14
<PAGE> 21
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Agent's Letter, the Letters of Credit, the Letter of Credit
Agreements, any Interest Rate Protection Agreement or Currency Hedge Agreement
between the Borrower or any of its Subsidiaries and any Lender and all other
agreements, documents and instruments now or hereafter executed and/or
delivered pursuant to or in connection with any of the foregoing, and any and
all amendments, modifications, supplements, renewals, extensions or
restatements thereof.
"Loan Party" means (a) the Borrower, Parcelway Canada, Parcelway BC,
Dynamex East and Dynamex West, (b) on and after the Funding Date, Action
Delivery, Seidel Delivery, Now Courier, Seko, YS, Attention Messenger,
Southbank Courier, KHB and Zipper, (c) each of the Subsidiaries of the Borrower
and (d) any other Person who is or becomes a party to any agreement, document
or instrument that Guarantees or secures payment or performance of the
Obligations or any part thereof.
"Loans" means as specified in Section 2.1, and "Loan" means any of
such Loans.
"Material Adverse Effect" means any material adverse effect, or the
occurrence of any event or the existence of any condition that could reasonably
be expected to have a material adverse effect, on (a) the prospects, business
or financial condition or performance of the Borrower and its Subsidiaries,
taken as a whole, or of the Borrower, Dynamex East or Dynamex West on an
individual basis, (b) the prospects, business or financial condition or
performance of Parcelway Canada and its Subsidiaries, taken as a whole, or of
Parcelway Canada on an individual basis, (c) the ability of the Borrower to pay
and perform the Obligations when due, or (d) the validity or enforceability of
(i) any of the Loan Documents, (ii) any Lien created or purported to be created
by any of the Loan Documents or the required priority of any such Lien, or
(iii) the rights and remedies of the Agent or the Lenders under any of the Loan
Documents.
"Material Contracts" means, as to any Person, any supply, purchase,
service, employment, tax, indemnity, shareholder or other agreement or contract
for which the aggregate amount or value of services performed or to be
performed for or by, or funds or other Property transferred or to be
transferred to or by, such Person or any of its Subsidiaries party to such
agreement or contract, or by which such Person or any of its Subsidiaries or
any of their respective Properties are otherwise bound, during any fiscal year
of the Borrower exceeds $100,000 or Cdn. $150,000, and any and all amendments,
modifications, supplements, renewals or restatements thereof.
"Maturity Date" means May 31, 2003.
"Maximum Rate" means, with respect to any Lender, the maximum
non-usurious interest rate, if any, that any time or from time to time may be
contracted for, taken, reserved, charged or received with respect to the
particular Obligations as to which such rate is to be determined, payable to
such Lender pursuant to this Agreement or any other Loan Document, under laws
applicable to such Lender which are presently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum non-usurious interest rate than applicable laws
now allow. The Maximum Rate shall be calculated in a manner that takes into
account any and all fees, payments and other charges in respect of the Loan
Documents that constitute interest under applicable law. Each change in any
interest rate provided for herein based upon the Maximum Rate resulting from a
change in the Maximum Rate
15
<PAGE> 22
shall take effect without notice to the Borrower at the time of such change in
the Maximum Rate. For purposes of determining the Maximum Rate under Texas
law, the applicable rate ceiling shall be the indicated rate ceiling described
in, and computed in accordance with, Article 5069-1.04, Vernon's Texas Civil
Statutes or any successor or replacement statute; provided, however, that, to
the extent permitted by applicable law, the Agent shall have the right to
change the applicable rate ceiling from time to time in accordance with
applicable law.
"Mayne Nickless Acquisition" means the acquisition by Parcelway
Canada, Dynamex East and Dynamex West of certain Property of the Mayne Nickless
Sellers pursuant to the Mayne Nickless Acquisition Agreement.
"Mayne Nickless Acquisition Agreement" means that certain Asset
Purchase Agreement dated December 29, 1995, among Dynamex East, Dynamex West,
Parcelway Canada, Mayne Nickless Incorporated, Mayne Nickless Canada Inc. and
the Mayne Nickless Sellers and any and all amendments, modifications,
supplements, renewals, extensions or restatements thereof.
"Mayne Nickless Sellers" means Mayne Nickless Courier Systems, Inc.,
Mayne Nickless Messenger Services, Inc., Mayne Nickless Transport Inc.
(including its IPX Courier and Loomis Rush Messenger divisions), the sellers
under the Mayne Nickless Acquisition Agreement.
"Mortgaged Properties" means, collectively, any real Properties or
interests therein which become or are required to become subject to Mortgages
pursuant to Section 5.4 hereof.
"Mortgages" means any (if any) deed of trusts, leasehold deeds of
trust, mortgages, leasehold mortgages, collateral assignments of leases and
other real estate security documents executed and delivered pursuant to this
Agreement by the Borrower or any of its Subsidiaries or any other Loan Party in
favor of the Agent for the benefit of the Agent and the Lenders with respect to
any Mortgaged Property, and any and all amendments, modifications, supplements,
renewals or restatements thereof.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by or are required
from any Loan Party or any ERISA Affiliate since 1974 and which is covered by
Title IV of ERISA.
"NationsBank" means NationsBank of Texas, N.A., a national banking
association.
"Net Income" means, for any period, the net income (or loss) of the
Borrower and its Subsidiaries (or other applicable Person) for such period,
determined on a consolidated basis in accordance with GAAP.
"Net Proceeds" means, with respect to any Asset Disposition, (a) the
gross amount of cash received by the Borrower or any of its Subsidiaries from
such Asset Disposition, minus (b) the amount, if any, of all taxes paid or
payable by the Borrower or any of its Subsidiaries directly resulting from such
Asset Disposition (including the amount, if any, estimated by the Borrower in
good faith at the time of such Asset Disposition for taxes payable by the
Borrower or any of its Subsidiaries on or measured by net income or gain
resulting from such Asset Disposition), minus (c) the reasonable out-of-pocket
costs and expenses incurred by the Borrower or such
16
<PAGE> 23
Subsidiary in connection with such Asset Disposition (including reasonable
brokerage fees paid to a Person other than an Affiliate of the Borrower)
excluding any fees or expenses paid to an Affiliate of the Borrower, minus (d)
amounts applied to the repayment of indebtedness (other than the Obligations)
secured by any Permitted Lien (if any) on the Property subject to the Asset
Disposition. "Net Proceeds" with respect to any Asset Disposition shall also
include proceeds (after deducting any amounts specified in clauses (b), (c) and
(d) of the preceding sentence) of insurance with respect to any actual or
constructive loss of Property, an agreed or compromised loss of Property or the
taking of any Property under the power of eminent domain and condemnation
awards and awards in lieu of condemnation for the taking of Property under the
power of eminent domain, except such proceeds and awards as are released to and
used by the Borrower or any of its Subsidiaries in accordance with Section 8.5.
"New Acquisitions" means the Action Delivery Acquisition, the Seidel
Delivery Acquisition, the Seko/Metro Acquisition, the Southbank Acquisition and
the Zipper Acquisition.
"New Acquisition Agreements" means the Acquisition Agreements relating
to the New Acquisitions.
"New Loan Parties" means Action Delivery, Seidel Delivery, Now
Courier, Seko, YS, Attention Messenger, Southbank Courier, KHB and Zipper, all
of which corporations are to become Loan Parties on the Funding Date.
"Notes" means the Promissory Notes, in the form of Exhibit B hereto,
made by the Borrower evidencing the Loans and any and all amendments,
modifications, supplements, renewals, extensions or restatements thereof and
all substitutions therefor (including promissory notes issued by the Borrower
pursuant to Section 13.8), and "Note" means any of such promissory note.
"Now Courier" means as specified in the introductory paragraph of this
Agreement.
"Obligations" means any and all (a) indebtedness, liabilities and
obligations of the Borrower and the other Loan Parties, or any of them, to the
Agent, the Issuing Bank and the Lenders, or any of them, evidenced by and/or
arising pursuant to any of the Loan Documents (including, without limitation,
this Agreement, the Notes and the Guaranties), now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several or joint and several, including,
without limitation, (i) the obligations of the Borrower and the Guarantors to
repay the Loans and the Reimbursement Obligations, to pay interest on the Loans
and the Reimbursement Obligations (including, without limitation, interest
accruing after any, if any, bankruptcy, insolvency, reorganization or other
similar filing) and to pay all fees, indemnities, costs and expenses (including
attorneys' fees) provided for in the Loan Documents and (ii) the indebtedness
constituting the Loans, the Reimbursement Obligations and such fees,
indemnities, costs and expenses, and (b) indebtedness, liabilities and
obligations of the Borrower or any of its Subsidiaries under any and all
Interest Rate Protection Agreements and Currency Hedge Agreements that it may
enter into with any Lender with the prior written consent of the Agent and the
Required Lenders.
17
<PAGE> 24
"Operating Lease" means, with respect to any Person, any lease, rental
or other agreement for the use by that Person of any Property which is not a
Capital Lease Obligation.
"Outstanding Credit" means, at any particular time, the sum of (a) the
aggregate outstanding principal amount of the Loans plus (b) the Letter of
Credit Liabilities.
"Parcelway BC" means as specified in the introductory paragraph of
this Agreement.
"Parcelway Canada" means as specified in the introductory paragraph of
this Agreement.
"Parcelway Courier" means Parcelway Courier Systems, Inc., an Arizona
corporation which was previously merged with and into Dynamex West.
"Parcelway Illinois" means Parcelway Courier Systems of Illinois,
Inc., an Arizona corporation which was previously merged with and into Dynamex
West.
"Parcelway International" means Parcelway Systems (International),
Inc., an Arizona corporation which was previously merged with and into Dynamex
West.
"Parcelway III" means Parcelway Courier Systems III, Inc., an Arizona
corporation which was previously merged with and into Dynamex West.
"Payor" means as specified in Section 3.4.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PBGF" means the Ontario Pension Benefits Guarantee Fund.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA (including a Multiemployer Plan) which is subject to the
funding requirements under Section 302 of ERISA or Section 412 of the Code, in
whole or in part, and which is maintained or contributed to currently or at any
time within the six years immediately preceding the Closing Date or, in the
case of a Multiemployer Plan, at any time since September 2, 1974, by any
Borrower or any ERISA Affiliate for employees of any Borrower or any ERISA
Affiliate.
"Peril" means as specified in Section 8.5(a).
"Permit" means any permit, certificate, approval, order, license or
other authorization.
"Permitted Liens" means:
(a) Liens disclosed on Schedule 1.1(a) hereto;
(b) Liens securing the Obligations in favor of the Agent
(for the benefit of the Agent and the Lenders) pursuant to the Loan
Documents;
18
<PAGE> 25
(c) Encumbrances consisting of easements, rights-of-way,
zoning restrictions or other restrictions on the use of real Property
or, as to the real Property referred to in clause (ii) below only,
imperfections to title that (i) as to any Mortgaged Property, do not
(individually or in the aggregate) materially affect the value of the
Property encumbered thereby or materially impair the ability of the
Borrower or any of its Subsidiaries to use such Property in its
businesses, and none of which is violated in any material respect by
existing or proposed structures or land use, and (ii) as to any real
Property other than Mortgaged Property, were entered into in the
ordinary course of business and could not have a Material Adverse
Effect;
(d) Liens for taxes, assessments or other governmental
charges that are not delinquent or which are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such
Liens, and for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen,
carriers, landlords or other similar statutory Liens securing
obligations that are not yet due and are incurred in the ordinary
course of business or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such
Liens, and for which adequate reserves have been established;
(f) Liens resulting from good faith deposits to secure
payment of workmen's compensation or other social security programs or
to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, contracts (other than for payment of Debt) or
leases, all in the ordinary course of business;
(g) Purchase-money Liens on any Property hereafter
acquired or the assumption after the Closing Date of any Lien on
Property existing at the time of such acquisition (and not created in
contemplation of such acquisition), or a Lien incurred after the
Closing Date in connection with any conditional sale or other title
retention agreement or Capital Lease Obligation; provided that:
(i) any Property subject to the foregoing is
acquired by the Borrower or any of its Subsidiaries in the
ordinary course of its respective business and the Lien on the
Property attaches concurrently or within 90 days after the
acquisition thereof;
(ii) the Debt secured by any Lien so created,
assumed or existing shall not exceed the lesser of the cost or
fair market value at the time of acquisition of the Property
covered thereby;
(iii) each such Lien shall attach only to the
Property so acquired and the proceeds thereof; and
(iv) the Debt secured by all such Liens shall not
exceed $250,000 at any time outstanding in the aggregate; and
19
<PAGE> 26
(h) Any extension, renewal or replacement of any of the
foregoing, provided that Liens permitted hereunder shall not be
extended or spread to cover any additional indebtedness or Property;
provided, however, that (A) none of the Permitted Liens (except those in favor
of the Agent) may attach or relate to the Capital Stock of or any other
ownership interest in the Borrower or any of its Subsidiaries and (B) none of
the Permitted Liens referred to in clause (a) preceding may have a priority
equal or prior to the Liens in favor of the Agent as security for the
Obligations.
"Permitted Subordinated Debt" means Debt of the Borrower which meets
all of the following requirements: (a) such Debt is wholly unsecured; and (b)
such Debt is evidenced and governed by agreements, documents and instruments in
form and substance, and containing payment, subordination and other terms and
provisions, which have been wholly approved by the Agent in writing prior to
the incurrence of such Debt.
"Person" means any individual, corporation, trust, association,
company, partnership, joint venture, limited liability company, Governmental
Authority or other entity.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA established or maintained or contributed to by any Loan Party or any
ERISA Affiliate, including any Pension Plan.
"Prime Rate" means, at any time, the rate of interest per annum then
most recently established by NationsBank as its highest commercial prime rate
then in effect, which rate may not be the lowest rate of interest charged by
NationsBank to its commercial borrowers. Each change in any interest rate
provided for herein based upon the Prime Rate resulting from a change in the
Prime Rate shall take effect without notice to the Borrower at the time of such
change in the Prime Rate.
"Prime Rate Loans" means Loans that bear interest at rates based upon
the Prime Rate.
"Principal Office" means the principal office of the Agent in Dallas,
Texas, presently located at 901 Main Street, 7th Floor, Dallas, Texas 75202.
"Prior Acquisitions" means the following prior acquisitions by the
Borrower or a Subsidiary of the Borrower: (a) the acquisition by Parcelway
Canada of assets of Rainbow Couriers Ltd. and Demand Dispatch Services Ltd.
from Gray Line of Victoria Ltd. during May 1994, (b) the acquisition by
Parcelway Courier of assets of Big Apple Courier Service of Tucson, Arizona
during January 1993, (c) the acquisition by Parcelway Courier of assets of RAD
Delivery and Messenger Service of Phoenix Arizona during April 1993, (d) the
acquisition by Parcelway Courier of assets of DLC Consulting Group of Phoenix,
Arizona during June 1993, (e) the acquisition by Parcelway International of the
assets of Quick Delivery Corp. of Phoenix, Arizona during January 1994, (f) the
acquisition by Parcelway Illinois of the assets of Minutemen Messenger Service
Incorporated during February 1994, and (g) the acquisition by Parcelway III of
the assets of Advanced Messenger Service Inc. during April 1994.
20
<PAGE> 27
"Prior Acquisition Documents" means all agreements, documents or
instruments evidencing or governing any Prior Acquisition.
"Pro Formas" means the unaudited pro forma financial statements of the
Borrower and its consolidated Subsidiaries after giving effect to the Related
Transactions (including, without limitation, the New Acquisitions and the
consummation of the Dynamex IPO) as contained in the Registration Statement,
which Pro Formas are attached hereto as Schedule 1.1(b).
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"Projections" means the Borrower's forecasted consolidated (a) balance
sheets, (b) income statements, and (c) cash flow statements, together with
appropriate supporting details and a statement of underlying assumptions, after
giving effect to the Related Transactions (including, without limitation, the
New Acquisitions and the consummation of the Dynamex IPO), which Projections
are dated March 4, 1996, and April 24, 1996, and are attached hereto as
Schedule 1.1(c).
"Property" means property of all kinds, real, personal or mixed,
tangible or intangible (including, without limitation, all rights relating
thereto), whether owned or acquired on or after the Closing Date.
"Quarterly Date" means the last day of each March, June, September and
December of each year, the first of which shall be September 30, 1996.
"Receivables" means, as at any date of determination thereof, each and
every "account" as such term is defined in the UCC and includes, without
limitation, the unpaid portion of the obligation, as stated on the respective
invoice, or, if there is no invoice, other writing, of a customer of the
Borrower or any of its Subsidiaries in respect of Inventory sold and shipped or
services rendered by the Borrower or any of its Subsidiaries.
"Reference Lender" means NationsBank.
"Register" means as specified in Section 13.8(d).
"Registration Statement" means the Borrower's Form S-1 Registration
Statement (Registration No. 333-05293) as filed with the Securities and
Exchange Commission on June 6, 1996, and all amendments and supplements
thereto.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to any Lender, any change
after the Closing Date in any U.S. federal or state, Canadian federal
or provincial or foreign laws or regulations (including Regulation D) or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders including such Lender of or under any
U.S. federal or state, Canadian federal or provincial or foreign laws or
regulations (whether or not
21
<PAGE> 28
having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Bank for any drawing under a Letter of Credit.
"Related Transactions" means, collectively, (a) the Acquisitions, (b)
the execution and delivery of the Related Transactions Documents, (c) the
issuance of the Dynamex Common Stock pursuant to the Dynamex IPO and the
Borrower's receipt of cash proceeds in connection therewith, (d) the payment in
full of all principal, interests, fees and expenses payable by the Borrower or
any of its Subsidiaries pursuant to the Existing Agreement with the proceeds of
the Dynamex IPO or with the proceeds of Loans made pursuant to this Agreement,
(e) the payment of the Air Canada Subordinated Debt and the Shareholders
Subordinated Debt in full with the proceeds of the Dynamex IPO, (f) the
incorporation, establishment and organization of the Subsidiaries of the
Borrower, and (g) the payment of all fees, costs and expenses associated with
the foregoing.
"Related Transactions Documents" means the Acquisition Documents, the
agreements, documents and instruments relating to the Dynamex IPO and all other
agreements, documents and instruments executed and/or delivered pursuant to or
in connection with any of the foregoing.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, discharge, disposal, disbursement,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment or into or out of Property owned by such Person, including, without
limitation, the movement of Hazardous Materials through or in the air, soil,
surface water or ground water.
"Remedial Action" means all actions required to (a) cleanup, remove,
respond to, treat or otherwise address Hazardous Materials in the indoor or
outdoor environment, (b) prevent the Release or threat of Release or minimize
the further Release of Hazardous Materials so that they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) perform studies and investigations on the extent and
nature of any actual or suspected contamination, the remedy or remedies to be
used or health effects or risks of such contamination, or (d) perform
post-remedial monitoring, care or remedy of a contaminated site.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Required Lenders" means, at any date of determination, Lenders having
in the aggregate at least 66 2/3% (in Dollar amount) of the aggregate amount of
the outstanding Commitments (or, if such Commitments have terminated or
expired, the aggregate outstanding principal amount of the Loans and the
aggregate Letter of Credit Liabilities).
"Required Payment" means as specified in Section 3.4.
"Reserve Requirement" means, for any Eurodollar Loan of any Lender for
any Interest Period therefor, the maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under any
22
<PAGE> 29
regulations of the Board of Governors of the Federal Reserve System (or any
successor) by such Lender for deposits exceeding $1,000,000 against
"Eurocurrency Liabilities" as such term is used in Regulation D. Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such Lenders by reason of any
Regulatory Change against (a) any category of liabilities which includes
deposits by reference to which the Eurodollar Rate or the Adjusted Eurodollar
Rate is to be determined or (b) any category of extensions of credit or other
assets which include Eurodollar Loans.
"Responsible Officer" means, as to any Loan Party, the chief financial
officer, chief operating officer or chief executive officer of such Person.
"Restricted Payment" means (a) any dividend or other distribution
(whether in cash, Property or obligations), direct or indirect, on account of
(or the setting apart of money for a sinking or other analogous fund for) any
shares of any class of Capital Stock of the Borrower or any of its Subsidiaries
now or hereafter outstanding, except a dividend payable solely in shares of
that class of stock to the holders of that class; (b) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
Capital Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding; (c) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, purchase, retirement or
defeasance of, or payment with respect to, any Subordinated Debt; (d) any loan,
advance or payment to any officer, director or shareholder of the Borrower or
any of its Subsidiaries (other than a shareholder consisting of the Borrower or
a Wholly-Owned Subsidiary of the Borrower), exclusive of reasonable
compensation paid to officers or directors paid in the ordinary course of
business and exclusive of consulting fees paid to George M. Siegel which comply
with Section 9.7; and (e) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of the Borrower or any of its Subsidiaries
now or hereafter outstanding.
"Revolving Period" means the period commencing on the Funding Date and
ending on the day immediately preceding the Revolving Period Termination Date.
"Revolving Period Termination Date" means May 31, 1998.
"Security Agreements" means security agreements, pledge agreements,
securities pledge agreements, debenture pledge agreements, hypothecs, bank act
security documents, and other agreements, documents or instruments evidencing
or creating a Lien as security for the Obligations or any portion thereof in
form and substance satisfactory to the Agent executed by the Borrower and each
of its Subsidiaries and any other Loan Party (one executed by each such Loan
Party), dated the Closing Date or the Funding Date, in favor of the Agent for
the benefit of the Agent and the Lenders, and any such agreement, document or
instrument executed pursuant to Section 5.3 hereof, and any and all amendments,
modifications, supplements, renewals, extensions or restatements thereof.
"Security Documents" means the Guaranties, the Security Agreements and
the Mortgages, as they may be amended, modified, supplemented, renewed,
extended or restated from time to time, and any and all other agreements, deeds
of trust, mortgages, chattel mortgages, security
23
<PAGE> 30
agreements, pledges, guaranties, assignments of proceeds, assignments of
income, assignments of contract rights, assignments of partnership interests,
assignments of royalty interests, assignments of performance or other
collateral assignments, completion or surety bonds, standby agreements,
subordination agreements, undertakings and other agreements, documents,
instruments and financing statements now or hereafter executed and/or delivered
by any Loan Party in connection with or as security or assurance for the
payment or performance of the Obligations or any part thereof.
"Seidel Delivery" means as specified in the introductory paragraph of
this Agreement.
"Seidel Delivery Acquisition" means the acquisition by the Borrower of
the Capital Stock of Seidel Delivery and Now Courier pursuant to the Seidel
Delivery Acquisition Agreement.
"Seidel Delivery Acquisition Agreement" means that certain Agreement
and Plan of Merger dated June 3, 1996, by and among the Borrower, SEI
Acquisition Corp., NCI Acquisition Corp., Seidel Delivery, Now Courier and
Edward F. Seidel, Jr. in the form previously submitted to and approved by the
Agent, and any and all amendments, modifications, supplements, renewals,
extensions or restatements thereof.
"Seko" means as specified in the introductory paragraph of this
Agreement.
"Seko/Metro Acquisition" means the acquisition by the Borrower of the
Capital Stock of Seko, YS and Attention Messenger pursuant to the Seko/Metro
Acquisition Agreement.
"Seko/Metro Acquisition Agreement" means that certain Stock Purchase
Agreement dated as of June 3, 1996, by and among the Borrower, NSK Enterprises,
Inc., Seko, YS, Attention Messenger, Norman Koppel and Joe Garcia in the form
previously submitted to and approved by the Agent, and any and all amendments,
modifications, supplements, renewals, extensions or restatements thereof.
"Senior Funded Debt" means, at any particular time, all Funded Debt
exclusive of Permitted Subordinated Debt.
"Shareholders Subordinated Debt" means the Debt evidenced or governed
by the Shareholders Subordinated Debt Agreement or the Shareholders
Subordinated Notes.
"Shareholders Subordinated Debt Agreement" means that certain
Securities Purchase Agreement dated as of December 29, 1995, by and among the
Borrower, Cypress and James M. Hoak.
"Shareholders Subordinated Notes" means (a) that certain Junior
Subordinated Debenture dated December 29, 1995, in the original principal
amount of $3,500,000 made by the Borrower payable to James M. Hoak and (b) that
certain Junior Subordinated Debenture dated December 29, 1995, in the original
principal amount of $1,000,000 made by the Borrower payable to Cypress, and any
and all amendments, modifications, supplements, renewals, extensions,
restatements or replacements of any of the foregoing.
24
<PAGE> 31
"Solvent" means, with respect to any Person as of the date of any
determination, that on such date (a) the fair value of the Property of such
Person (both at fair valuation and at present fair saleable value) is greater
than the total liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (d) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (e) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's Property would constitute
unreasonably small capital after giving due consideration to current and
anticipated future capital requirements and current and anticipated future
business conduct and the prevailing practice in the industry in which such
Person is engaged. In computing the amount of contingent liabilities at any
time, such liabilities shall be computed at the amount which, in light of the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Southbank Courier Acquisition" means the acquisition by the Borrower
of the Capital Stock of Southbank pursuant to the Southbank Acquisition
Agreement.
"Southbank Courier Acquisition Agreement" means that certain Stock
Purchase Agreement dated as of June 3, 1996, by and among the Borrower, Express
It Inc., Express-It Acquisition Company, L.L.C., Barry J. Steingard and William
Castor in the form previously submitted to and approved by the Agent, and any
and all amendments, modifications, supplements, renewals, extensions or
restatements thereof.
"Southbank Courier" means as specified in the introductory paragraph
of this Agreement.
"Subordinated Debt" means, at any particular time, (a) the Air Canada
Subordinated Debt, (b) the Shareholders Subordinated Debt, and (c) any and all
other current or future Debt of the Borrower or any of its Subsidiaries which
is subordinated to all or any portion of the Obligations (including, without
limitation, Permitted Subordinated Debt).
"Subordinated Debt Documents" means (a) the Air Canada Subordinated
Note, (b) the Shareholders Subordinated Debt Agreement, (c) the Shareholders
Subordinated Notes, and (d) any and all other agreements, documents and
instruments now or hereafter evidencing or governing any Subordinated Debt.
"Subordinated Notes" means (a) the Air Canada Subordinated Note, (b)
the Shareholders Subordinated Notes, and (c) any and all amendments,
modifications, supplements, renewals, extensions or restatements of such notes.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which at least a majority of the outstanding shares of stock or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors (or Persons performing similar
functions) of such corporation or entity (irrespective of whether or not at the
25
<PAGE> 32
time, in the case of a corporation, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more of its Subsidiaries or by such Person and one or
more of its Subsidiaries.
"Term Period" means the period commencing on the Revolving Period
Termination Date and ending on the Maturity Date or on such later date when all
Loans shall be paid in full.
"Type" means any type of Loan (i.e., a Prime Rate Loan or Eurodollar
Loan).
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas and/or any other jurisdiction, the laws of which may be applicable to or
in connection with the creation, perfection or priority of any Lien on any
Property created pursuant to any Security Document.
"Unified Cash Management System" means as specified in Section 8.14.
"U.S." means the United States of America.
"U.S. Person" means a citizen or resident of the U.S., a corporation,
partnership or other entity created or organized in or under any laws of the
U.S. or any estate or trust that is subject to U.S. Federal income taxation
regardless of the source of its income.
"U.S. Taxes" means any present or future tax, assessment or other
charge or levy imposed by or on behalf of the U.S. or any taxing authority
thereof.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person all of whose outstanding Capital Stock (other than
directors' qualifying shares, if any) shall at the time be owned by such Person
and/or one or more of its Wholly-Owned Subsidiaries.
"YS" means as specified in the introductory paragraph of this
Agreement.
"Zipper" means the as specified in the introductory paragraph of this
Agreement.
"Zipper Acquisition" means the acquisition by Parcelway Canada of the
Capital Stock of KHB (and, indirectly, Zipper) pursuant to the Zipper
Acquisition Agreement.
"Zipper Acquisition Agreement" means that certain Agreement dated as
of June 3, 1996, by and among Kenneth H. Bishop, Bruce W. Bishop, the
Borrower, Zipper and KHB in the form previously submitted to and approved by
the Agent, and any and all amendments, modifications, supplements, renewals,
extensions or restatements thereof.
Section 1.2 Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and plural
forms of the terms defined. The words "hereof", "herein" and "hereunder" and
words of similar import referring to this Agreement refer to this Agreement as
a whole and not to any particular provision of this Agreement. Unless
otherwise specified, all Article and Section references pertain to this
Agreement. Terms used herein
26
<PAGE> 33
that are defined in the UCC, unless otherwise defined herein, shall have the
meanings specified in the UCC.
Section 1.3 Accounting Terms and Determinations.
(a) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP (subject to year end adjustments, if
applicable) consistent with such accounting principles applied in the
preparation of the audited financial statements referred to in Section 7.2(a).
All financial information delivered to the Agent pursuant to Section 8.1 shall
be prepared in accordance with GAAP (subject to year end adjustments, if
applicable) applied on a basis consistent with such accounting principles
applied in the preparation of the audited financial statements referred to in
Section 7.2(a) or in accordance with Section 8.7.
(b) The Borrower shall deliver to the Agent and the Lenders, at
the same time as the delivery of any annual, quarterly or monthly financial
statement under Section 8.1, (i) a description, in reasonable detail, of any
material variation between the application of GAAP employed in the preparation
of the next preceding annual, quarterly or monthly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) preceding and (ii) reasonable estimates of the difference
between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in this Agreement (including Article 10 hereof),
neither the Borrower nor any of its Subsidiaries will change the last day of
its fiscal year from July 31 or, if changed in contemplation of the Dynamex
IPO, December 31, or the last days of the first three fiscal quarters of the
Borrower and its Subsidiaries in each of its fiscal years from that existing on
the Closing Date or to reflect a change to a fiscal year ending December 31.
(d) Unless other expressly provided herein to the contrary, all
references herein to the Funding Date shall be deemed to mean and refer to the
Funding Date after giving effect to the Dynamex IPO, the New Acquisitions and
the Related Transactions which are to occur on such date.
Section 1.4 Financial Covenants and Reporting. The financial
covenants contained in Article 10 shall be calculated on a consolidated basis
for the Borrower and its Subsidiaries (including, without limitation, Parcelway
Canada and its Subsidiaries) in accordance with GAAP; provided, however, that
the historical financial information (and any anticipated and reasonably
provable improvements to EBITDA or Net Income consented to by the Required
Lenders) for the relevant periods attributable to (a) the New Loan Parties, and
(b) with respect to the purchase or acquisition of all of the Capital Stock of
an Acquired Entity (as such term is defined in clause (ii) of Section 9.3) or
substantially all of the assets of a Person, in each case as permitted by
clause (ii) of Section 9.3, such Acquired Entity or such assets so acquired
shall be included in the calculation of (i) EBITDA for purposes of Section 10.1
and (ii) Net Income, income and franchise taxes, operating lease expenses, rent
expenses and Interest Expense for purposes of the determination of the Fixed
Charge Coverage Ratio in Section 10.2.
ARTICLE 2
27
<PAGE> 34
Loans
Section 2.1 Commitments.
(a) Loans. Subject to the terms and conditions of this Agreement
(including, without limitation, Section 2.13(a)), each Lender severally agrees
to make one or more loans to the Borrower from time to time from and including
the Funding Date to but excluding the Revolving Period Termination Date up to
but not exceeding the positive remainder of (i) the amount of such Lender's
Commitment as then in effect minus (ii) such Lender's Commitment Percentage of
the Letter of Credit Liabilities then outstanding. (Such loans referred to in
this Section 2.1(a) now or hereafter made by the Lenders to the Borrower from
and including and after the Funding Date, including, without limitation, such
Loans which remain outstanding after the Revolving Period, are hereinafter
collectively called the "Loans".) Subject to the foregoing limitations and the
other terms and conditions of this Agreement, the Borrower may borrow, repay
and reborrow the Loans hereunder during (but not after) the Revolving Period.
(b) Continuation and Conversion of Loans. Subject to the terms
and conditions of this Agreement, the Borrower may borrow the Loans as Prime
Rate Loans or Eurodollar Loans and, until the Maturity Date, the Borrower may
Continue Eurodollar Loans or Convert Loans of one Type into Loans of the other
Type.
(c) Lending Offices. Loans of each Type made by each Lender shall
be made and maintained at such Lender's Applicable Lending Office for Loans of
such Type.
Section 2.2 Notes. The Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit B hereto, dated the Funding Date (or such later date on which such
Lender becomes a party to this Agreement), payable to the order of such Lender
in a principal amount equal to its Commitment as originally in effect and
otherwise duly completed. Each Lender is hereby authorized by the Borrower to
endorse on the schedule (or a continuation thereof) attached to the Note of
such Lender, to the extent applicable, the date, amount and Type of and the
Interest Period for each Loan made by such Lender to the Borrower and the
amount of each payment or prepayment of principal of such Loan received by such
Lender, provided that any failure by such Lender to make any such endorsement
shall not affect the obligations of the Borrower under such Note or this
Agreement in respect of such Loan.
Section 2.3 Repayment of Loans. The Borrower shall pay to the
Agent for the account of each applicable Lender the principal of the Loans
outstanding as of the Revolving Period Termination Date (and the principal of
the Loans outstanding as of the Revolving Period Termination Date shall be due
and payable) in (a) 19 equal quarterly installments, commencing on September
30, 1998, and continuing on each Quarterly Date thereafter through and
including March 31, 2003, and (b) in one final installment on the Maturity
Date, each of which installments shall be in an amount equal to five percent of
the aggregate principal amount of the Loans outstanding as of the Revolving
Period Termination Date. In addition, the Borrower shall pay to the Agent for
the account of each applicable Lender all outstanding principal of the Loans
(and all outstanding principal of the Loans shall be due and payable) on the
Maturity Date.
28
<PAGE> 35
Section 2.4 Interest.
(a) Interest Rate. The Borrower shall pay to the Agent for the
account of each Lender interest on the unpaid principal amount of each Loan
made by such Lender to the Borrower for the period commencing on the date of
such Loan to but excluding the date such Loan shall be paid in full, at the
following rates per annum:
(i) during the periods such Loan is a Prime Rate Loan,
the lesser of (A) the Prime Rate plus the Applicable Margin or (B) the
Maximum Rate; and
(ii) during the periods such Loan is a Eurodollar Loan,
the lesser of (A) the Eurodollar Rate plus the Applicable Margin or
(B) the Maximum Rate.
(b) Payment Dates. Accrued interest on the Loans shall be due and
payable as follows:
(i) in the case of Prime Rate Loans, on each Quarterly
Date;
(ii) in the case of each Eurodollar Loan, on the last day
of the Interest Period with respect thereto and, in the case of an
Interest Period greater than three months, at three-month intervals
after the first day of such Interest Period;
(iii) upon the payment or prepayment of any Loan or the
Conversion of any Loan to a Loan of the other Type (but only on the
principal amount so paid, prepaid or Converted); and
(iv) on the Maturity Date.
(c) Default Interest. Notwithstanding the foregoing, the Borrower
shall pay to the Agent for the account of each Lender interest at the
applicable Default Rate on any principal of any Loan made by such Lender to the
Borrower, any Reimbursement Obligation and (to the fullest extent permitted by
law) any other amount payable by the Borrower under this Agreement or any other
Loan Document to or for the account of such Lender, which is not paid in full
when due (whether at stated maturity, by acceleration or otherwise), for the
period from and including the due date thereof to but excluding the date the
same is paid in full. Interest payable at the Default Rate shall be payable
from time to time on demand by the Agent.
Section 2.5 Borrowing Procedure. The Borrower shall give the
Agent notice of each borrowing hereunder in accordance with Section 2.9. Not
later than 11:00 a.m. (Dallas, Texas time) on the date specified for each
borrowing hereunder, each Lender will make available the amount of the Loan to
be made by it on such date to the Agent, at the Principal Office, in
immediately available funds, for the account of the Borrower. The amount so
received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by wire transfer of immediately
available funds to the Deposit Account no later than 1:00 p.m. (Dallas, Texas
time).
29
<PAGE> 36
Section 2.6 Optional Prepayments, Conversions and Continuations
of Loans. Subject to Section 2.7, the Borrower shall have the right from time
to time to prepay the Loans, to Convert all or part of a Loan of one Type into
a Loan of another Type or to Continue Eurodollar Loans; provided that: (a) the
Borrower shall give the Agent notice of each such prepayment, Conversion or
Continuation as provided in Section 2.9, (b) Eurodollar Loans may only be
Converted on the last day of the Interest Period, (c) except for Conversions of
Eurodollar Loans into Prime Rate Loans, no Conversions or Continuations shall
be made while a Default has occurred and is continuing, and (d) optional
prepayments of the Loans made during the Term Period shall be applied to the
then remaining installments of the Loans in the inverse order of the maturities
of such installments.
Section 2.7 Mandatory Prepayments.
(a) Insurance Recovery. The Borrower shall, within two Business
Days after it or any of its Subsidiaries receives any Excess Insurance Proceeds
aggregating $50,000 or more in amount at any time during the Term Period, pay
(or cause to be paid) to the Agent, as a prepayment of the Loans, an aggregate
amount equal to such Excess Insurance Proceeds.
(b) Application of Mandatory Prepayments. All prepayments
pursuant to Section 2.7(a) shall be applied to the then remaining installments
of principal of the Loans in the inverse order of the maturities of such
installments.
Section 2.8 Minimum Amounts. Except for Conversions and
prepayments pursuant to Section 2.7 and Article 4, each borrowing, each
Conversion and each prepayment of principal of the Loans shall be in an amount
at least equal to $250,000 or an integral multiple of $100,000 in excess
thereof (borrowings, prepayments or Conversions of or into Loans of different
Types or, in the case of Eurodollar Loans, having different Interest Periods at
the same time hereunder shall be deemed separate borrowings, prepayments and
Conversions for purposes of the foregoing, one for each Type or Interest
Period).
Section 2.9 Certain Notices. Notices by the Borrower to the
Agent of terminations or reductions of Commitments, of borrowings, Conversions,
Continuations and prepayments of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the Agent not
later than 11:00 a.m. (Dallas, Texas, time) on the Business Day prior to the
date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:
<TABLE>
<CAPTION>
Notice Number of
------ Business Days Prior
-------------------
<S> <C>
Terminations or Reductions of Commitments 1
Borrowings of Loans which are Prime Rate Loans 1
Borrowings of Loans which are Eurodollar Loans 3
Prepayments of Loans during the Revolving Period 1
</TABLE>
30
<PAGE> 37
<TABLE>
<S> <C>
Prepayments of Loans during the Term Period 5
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or prepayment shall specify the Loans to be borrowed,
Converted, Continued or prepaid and the amount (subject to Section 2.8 hereof)
and Type of the Loans to be borrowed, Converted, Continued or prepaid (and, in
the case of a Conversion, the Type of Loans to result from such Conversion) and
the date of borrowing, Conversion, Continuation or prepayment (which shall be a
Business Day). Notices of borrowings, Conversions, Continuations or
prepayments shall be in the form of Exhibit C hereto, appropriately completed
as applicable. Each such notice of the duration of an Interest Period shall
specify the Loans to which such Interest Period is to relate. The Agent shall
promptly notify the Lenders of the contents of each such notice. In the event
the Borrower fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as
provided in this Section 2.9, such Loan (if outstanding as Eurodollar Loan)
will be automatically Converted into a Prime Rate Loan on the last day of
preceding Interest Period for such Loan or (if outstanding as a Prime Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Prime
Rate Loan. The Borrower may not borrow any Eurodollar Loans, Convert any Loans
into Eurodollar Loans or Continue any Loans as Eurodollar Loans if the interest
rate for such Eurodollar Loans would exceed the Maximum Rate.
Section 2.10 Use of Proceeds.
(a) The Borrower agrees that the proceeds of the Loans to be made
on the Funding Date (together with certain proceeds of the Dynamex IPO), if
any, shall be used to pay the Existing Loans and interest accrued thereon in
full, and the Borrower hereby irrevocably requests that the Agent apply such
proceeds accordingly.
(b) The Borrower agrees that the proceeds of the Loans to be made
after the Funding Date shall be used by the Borrower and its Subsidiaries for
working capital and general corporate purposes in the ordinary course of
business and to finance acquisitions permitted by this Agreement and Capital
Expenditures permitted by this Agreement.
(c) None of the proceeds of any Loan have been or will be used to
acquire any security in any transaction that is subject to Section 13 or 14 of
the Securities Exchange Act of 1934, as amended, or to purchase or carry any
margin stock (within the meaning of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System).
Section 2.11 Fees.
(a) The Borrower agrees to pay to the Agent for the account of
each Lender a commitment fee on the daily average unused or unfunded amount of
such Lender's Commitment, for the period from and including the Funding Date to
and including the Revolving Period Termination Date, at the rate of one-quarter
of one percent (0.25%) per annum based on a 360 day year and the actual number
of days elapsed, which accrued commitment fees shall be payable in arrears on
each Quarterly Date and on the Revolving Period Termination Date.
31
<PAGE> 38
(b) The Borrower agrees to pay to the Agent and NationsBank such
additional fees as are specified in the Agent's Letter, which fees shall be
payable in such amounts and on such dates as are specified therein.
Section 2.12 Computations. Interest and fees payable by the
Borrower hereunder and under the other Loan Documents on all Loans shall be
computed on the basis of a year of 360 days and the actual number of days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable unless, in the case of interest, such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be.
Section 2.13 Termination or Reduction of Commitments.
(a) Notwithstanding anything to the contrary contained in this
Agreement, each of the Commitments shall automatically terminate at 2:00 p.m.
(Dallas, Texas time) on September 30, 1996, if the Dynamex IPO shall have not
been consummated by such time.
(b) The Borrower shall have the right to terminate or reduce in
part the unused portion of the Commitments at any time and from time to time
prior to the Revolving Period Termination Date, provided that (a) the Borrower
shall give notice of each such termination or reduction as provided in Section
2.9 and (b) each partial reduction shall be in an aggregate amount at least
equal to $500,000 or an integral multiple of $100,000 in excess thereof. The
Commitments may not be reinstated after they have been terminated or increased
after they have been reduced.
Section 2.14 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, the
Borrower may utilize the Commitments by requesting that the Issuing Bank issue
Letters of Credit; provided, that the aggregate amount of outstanding Letter of
Credit Liabilities shall not at any time exceed $3,000,000. Upon the date of
issue of each Letter of Credit, the Issuing Bank shall be deemed, without
further action by any party hereto, to have sold to each Lender, and each
Lender shall be deemed, without further action by any party hereto, to have
purchased from the Issuing Bank, a participation to the extent of such Lender's
Commitment Percentage in such Letter of Credit.
(b) The Borrower shall give the Issuing Bank (with a copy to the
Agent) at least five Business Days irrevocable prior notice (effective upon
receipt) specifying the date of each Letter of Credit and the nature of the
transactions to be supported thereby. Upon receipt of such notice the Issuing
Bank shall promptly notify each applicable Lender of the contents thereof and
of such Lender's Commitment Percentage of the amount of the proposed Letter of
Credit. Each Letter of Credit shall have an expiration date that does not
exceed one year from the date of issuance and that does not extend beyond 180
days after the Revolving Period Termination Date, shall be payable in Dollars,
shall support a transaction entered into in the ordinary course of the
Borrower's or its Wholly-Owned Subsidiary's business, shall be satisfactory in
form and substance to the Issuing Bank, and shall be issued pursuant to such
agreements, documents and instruments (including a Letter of Credit Agreement)
as the Issuing Bank may reasonably require, none of which shall be inconsistent
with this Section
32
<PAGE> 39
2.14. Each Letter of Credit shall (i) provide for the payment of drafts
presented for, on or thereunder by the beneficiary in accordance with the terms
thereof, when such drafts are accompanied by the documents (if any) described
in the Letter of Credit and (ii) to the extent not inconsistent with the terms
hereof or any applicable Letter of Credit Agreement, be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 (together with any subsequent revision
thereof approved by a Congress of the International Chamber of Commerce and
adhered to by the Issuing Bank, the "UCP"), and shall, as to matters not
governed by the UCP, be governed by, and construed and interpreted in
accordance with, the laws of the State of Texas.
(c) The Borrower agrees to pay to the Agent for the account of
each Lender, concurrently with the issuance of such Letter of Credit and on
each anniversary thereof, a nonrefundable letter of credit fee with respect to
each Letter of Credit issued in an amount equal to one percent (1.00%) per
annum of the face amount of the Letter of Credit then in effect. The Agent
agrees to pay to each Lender, promptly after receiving any payment of such
letter of credit fees, such Lender's Commitment Percentage of such fees. In
addition, the Borrower agrees to pay to the Issuing Bank for its own account,
concurrently with the issuance of such Letter of Credit and on each anniversary
thereof, a nonrefundable letter of credit fee with respect to each Letter of
Credit issued by the Issuing Bank in an amount equal to one-half of one percent
(0.50%) per annum of the face amount of the Letter of Credit then in effect.
In addition to the foregoing fees, the Borrower shall pay or reimburse the
Issuing Bank for such normal and customary costs and expenses, including,
without limitation, administrative, issuance, amendment, payment and
negotiation charges, as are incurred or charged by the Issuing Bank in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(d) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment or other drawing under such Letter of Credit, the
Issuing Bank shall promptly notify the Borrower and each Lender as to the
amount to be paid as a result of such demand or drawing and the respective
payment date. If at any time the Issuing Bank shall make a payment to a
beneficiary of a Letter of Credit pursuant to a drawing under such Letter of
Credit, each Lender will pay to the Issuing Bank, immediately upon the Issuing
Bank's demand at any time commencing after such payment until reimbursement
therefor in full by the Borrower, an amount equal to such Lender's Commitment
Percentage of such payment, together with interest on such amount for each day
from the date of such payment to the date of payment by such Lender of such
amount at a rate of interest per annum equal to the Federal Funds Rate.
(e) The Borrower shall be irrevocably and unconditionally
obligated to immediately reimburse the Issuing Bank for any amounts paid by the
Issuing Bank upon any drawing under any Letter of Credit, without presentment,
demand, protest or other formalities of any kind. The Issuing Bank will pay to
each Lender such Lender's Commitment Percentage of all amounts received from or
on behalf of the Borrower for application in payment, in whole or in part, of
the Reimbursement Obligation in respect of any Letter of Credit, but only to
the extent such Lender has made payment to the Issuing Bank in respect of such
Letter of Credit pursuant to subsection (d) above. Outstanding Reimbursement
Obligations shall bear interest at the Default Rate and such interest shall be
payable on demand.
33
<PAGE> 40
(f) The Reimbursement Obligations of the Borrower under this
Agreement and the other Loan Documents shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and the other Loan Documents under all circumstances whatsoever,
including, without limitation, the following circumstances:
(i) Any lack of validity or enforceability of any Letter
of Credit or any other Loan Document;
(ii) Any amendment or waiver of or any consent to
departure from any Loan Document;
(iii) The existence of any claim, setoff, counterclaim,
defense or other right which any Loan Party or other Person may have
at any time against any beneficiary of any Letter of Credit, the
Agent, the Issuing Bank, the Lenders or any other Person, whether in
connection with this Agreement or any other Loan Document or any
unrelated transaction;
(iv) Any statement, draft or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect whatsoever;
(v) Payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit, provided, that such
payment shall not have constituted gross negligence or willful
misconduct of the Issuing Bank; and
(vi) Any other circumstance whatsoever, whether or not
similar to any of the foregoing, provided that such other circumstance
or event shall not have been the result of the gross negligence or
willful misconduct of the Issuing Bank.
(g) The Borrower assumes all risks of the acts or omissions of any
beneficiary of any Letter of Credit with respect to its use of such Letter of
Credit. Neither the Agent, the Issuing Bank, the Lenders nor any of their
respective officers or directors shall have any responsibility or liability to
the Borrower or any other Person for: (a) the failure of any draft to bear any
reference or adequate reference to any Letter of Credit, or the failure of any
documents to accompany any draft at negotiation, or the failure of any Person
to surrender or to take up any Letter of Credit or to send documents apart from
drafts as required by the terms of any Letter of Credit, or the failure of any
Person to note the amount of any instrument on any Letter of Credit, (b)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, (c) the validity, sufficiency or genuineness of any draft or other
document, or any endorsement(s) thereon, even if any such draft, document or
endorsement should in fact prove to be in any and all respects invalid,
insufficient, fraudulent or forged or any statement therein is untrue or
inaccurate in any respect, (d) the payment by the Issuing Bank to the
beneficiary of any Letter of Credit against presentation of any draft or other
document that does not comply with the terms of the Letter of Credit, or (e)
any other circumstance whatsoever in making or failing to make any payment
under a Letter of Credit;
34
<PAGE> 41
provided, however, that, notwithstanding the foregoing, the Borrower shall have
a claim against the Issuing Bank, and the Issuing Bank shall be liable to the
Borrower, to the extent of any direct, but not indirect or consequential,
damages suffered by the Borrower which the Borrower proves in a final
nonappealable judgment were caused by (i) the Issuing Bank's willful misconduct
or gross negligence in determining whether documents presented under any Letter
of Credit complied with the terms thereof or (ii) the Issuing Bank's willful
failure to pay under any Letter of Credit after presentation to it of documents
strictly complying with the terms and conditions of such Letter of Credit. The
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
(h) All Letters of Credit issued pursuant to the Existing
Agreement shall be deemed to be Letters of Credit issued pursuant to this
Agreement.
ARTICLE 3
Payments
Section 3.1 Method of Payment. All payments of principal,
interest, fees and other amounts to be made by the Borrower under this
Agreement and the other Loan Documents shall be made to the Agent at the
Principal Office for the account of each Lender's Applicable Lending Office in
Dollars and in immediately available funds, without setoff, deduction or
counterclaim, not later than 11:00 a.m. (Dallas, Texas time) on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day). The Borrower shall, at the time of making each such payment, specify to
the Agent the sums payable by the Borrower under this Agreement and the other
Loan Documents to which such payment is to be applied (and in the event that
the Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Agent may apply such payment to the Obligations in such order
and manner as the Agent may elect, subject to Section 3.2). Upon the
occurrence and during the continuation of an Event of Default, all proceeds of
any Collateral, all funds from time to time on deposit in any Concentration
Account or any collection account referred to in Section 6.1(dd) or 8.14 and
all other funds of the Borrower or any Guarantor in the possession of the Agent
or any Lender, may be applied by the Agent to the Obligations in such order and
manner as the Agent may elect, subject to Section 3.2. Each payment received by
the Agent under this Agreement or any other Loan Document for the account of a
Lender shall be paid promptly to such Lender, in immediately available funds,
for the account of such Lender's Applicable Lending Office. Whenever any
payment under this Agreement or any other Loan Document shall be stated to be
due on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment fee, as
the case may be.
Section 3.2 Pro Rata Treatment. Except to the extent otherwise
provided in this Agreement: (a) each Loan shall be made by the Lenders under
Section 2.1, each payment of commitment fees under Section 2.11(a) shall be
made for the account of the Lenders, and each termination or reduction of the
Commitments under Section 2.13 shall be applied to the Commitments of the
Lenders, pro rata according to the respective unused Commitments; (b) the
35
<PAGE> 42
making, Conversion and Continuation of Loans of a particular Type (other than
Conversions provided for by Section 4.4) shall be made pro rata among the
Lenders holding Loans of such Type according to the amounts of their respective
Commitments; (c) each payment and prepayment by the Borrower of principal of or
interest on Loans of a particular Type shall be made to the Agent for the
account of the Lenders holding Loans of such Type pro rata in accordance with
the respective unpaid principal amounts of such Loans held by such Lenders; (d)
Interest Periods for Loans of a particular Type shall be allocated among the
Lenders holding Loans of such Type pro rata according to the respective
principal amounts held by such Lenders; and (e) the Lenders (other than the
Issuing Bank) shall purchase participations in the Letters of Credit pro rata
in accordance with their Commitment Percentages.
Section 3.3 Sharing of Payments, Etc. If a Lender shall obtain
payment of any principal of or interest on any of the Obligations due to such
Lender hereunder through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, it shall promptly purchase from
the other Lenders participations in the Obligations held by the other Lenders
in such amounts, and make such adjustments from time to time, as shall be
equitable to the end that all the Lenders shall share pro rata in accordance
with the unpaid principal and interest on the Obligations then due to each of
them. To such end, all of the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if all or any
portion of such excess payment is thereafter rescinded or must otherwise be
restored. Each of the Borrower and each other Loan Party agrees, to the
fullest extent it may effectively do so under applicable law, that any Lender
so purchasing a participation in the Obligations by the other Lenders may
exercise all rights of setoff, banker's lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Obligations in the amount of such participation. Nothing contained
herein shall require any Lender to exercise any such right or shall affect the
right of any Lender to exercise, and retain the benefits of exercising, any
such right with respect to any other indebtedness, liability or obligation of
the Borrower or any other Loan Party.
Section 3.4 Non-Receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Lender or the Borrower (the "Payor") prior to the
date on which such Lender is to make payment to the Agent of the proceeds of a
Loan to be made by it hereunder or the Borrower is to make a payment to the
Agent for the account of one or more of the Lenders, as the case may be (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient on such date and,
if the Payor has not in fact made the Required Payment to the Agent, the
recipient of such payment shall, on demand, pay to the Agent the amount made
available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to the Federal
Funds Rate for such period.
Section 3.5 Withholding Taxes. (a) All payments by the Borrower
of principal of and interest on the Loans and the Letter of Credit Liabilities
and of all fees and other amounts payable under the Loan Documents shall be
made free and clear of, and without deduction by reason of, any present or
future taxes, levies, duties, imposts, assessments or other charges levied
36
<PAGE> 43
or imposed by any Governmental Authority (other than taxes on the overall net
income of any Lender). If any such taxes, levies, duties, imposts, assessments
or other charges are so levied or imposed, the Borrower will (i) make
additional payments in such amounts so that every net payment of principal of
and interest on the Loans and the Letter of Credit Liabilities and of all other
amounts payable by it under the Loan Documents, after withholding or deduction
for or on account of any such present or future taxes, levies, duties, imposts,
assessments or other charges (including any tax imposed on or measured by net
income of a Lender attributable to payments made to or on behalf of a Lender
pursuant to this Section 3.5 and any penalties or interest attributable to such
payments), will not be less than the amount provided for herein or therein
absent such withholding or deduction (provided that the Borrower shall not have
any obligation to pay such additional amounts to any Lender to the extent that
such taxes, levies, duties, imposts, assessments or other charges are levied or
imposed by reason of the failure of such Lender to comply with the provisions
of Section 3.6), (ii) make such withholding or deduction and (iii) remit the
full amount deducted or withheld to the relevant Governmental Authority in
accordance with applicable law. Without limiting the generality of the
foregoing, the Borrower will, upon written request of any Lender, reimburse
each such Lender for the amount of (A) such taxes, levies, duties, imports,
assessments or other charges so levied or imposed by any Governmental Authority
and paid by such Lender as a result of payments made by the Borrower under or
with respect to the Loans other than such taxes, levies, duties, imports,
assessments and other charges previously withheld or deducted by the Borrower
which have previously resulted in the payment of the required additional amount
to such Lender, and (B) such taxes, levies, duties, assessments and other
charges so levied or imposed with respect to any Lender reimbursement under the
foregoing clause (A), so that the net amount received by such Lender (net of
payments made under or with respect to the Loans and the Letter of Credit
Liabilities) after such reimbursement will not be less than the net amount such
Lender would have received if such taxes, levies, duties, assessments and other
charges on such reimbursement had not been levied or imposed. The Borrower
shall furnish promptly to the Agent for distribution to each affected Lender,
as the case may be, upon request of such Lender, official receipts evidencing
any such payment, withholding or reduction.
(b) The Borrower will indemnify the Agent and each Lender (without
duplication) against, and reimburse the Agent and each Lender for, all present
and future taxes, levies, duties, imposts, assessments or other charges
(including interest and penalties) levied or collected (whether or not legally
or correctly imposed, assessed, levied or collected), excluding, however, any
taxes imposed on the overall net income of the Agent or such Lender or any
lending office of the Agent or such Lender by any jurisdiction in which the
Agent or such Lender or any such lending office is located, on or in respect of
this Agreement, any of the Loan Documents or the Obligations or any portion
thereof (the "reimbursable taxes"). Any such indemnification shall be on an
after-tax basis, taking into account any such reimbursable taxes imposed on the
amounts paid as indemnity.
(c) Without prejudice to the survival of any other term or
provision of this Agreement, the obligations of the Borrower under this Section
3.5 shall survive the payment of the Loans and the other Obligations and
termination of the Commitments.
Section 3.6 Withholding Tax Exemption. Each Lender that is not
incorporated or otherwise formed under the laws of the U.S. or a state thereof
agrees that it will, prior to or on
37
<PAGE> 44
or about the Closing Date or the date upon which it becomes a party to this
Agreement and if it is legally able to do so, deliver to the Borrower and the
Agent two duly completed copies of U.S. Internal Revenue Service Form 1001,
4224 or W-8, as appropriate, certifying in any case that such Lender is
entitled to receive payments from the Borrower under any Loan Document without
deduction or withholding of any U.S. federal income taxes. Each Lender which
so delivers a Form 1001, 4224 or W-8 further undertakes to deliver to the
Borrower and the Agent two additional copies of such form (or a successor form)
on or before the date such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrower or the Agent, in each case certifying that
such Lender is entitled to receive payments from the Borrower under any Loan
Document without deduction or withholding of any U.S. federal income taxes,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrower and the Agent that it is not
capable of receiving such payments without any deduction or withholding of U.S.
federal income tax.
ARTICLE 4
Yield Protection and Illegality
Section 4.1 Additional Costs.
(a) The Borrower shall pay directly to each Lender from time to
time, promptly upon the request of such Lender, the costs incurred by such
Lender which such Lender determines are attributable to its making or
maintaining of any Eurodollar Loans or its obligation to make any of such
Loans, or any reduction in any amount receivable by such Lender hereunder in
respect of any such Loans or obligations (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable
to such Lender under this Agreement or its Notes in respect of any of
such Loans (other than taxes imposed on the overall net income of such
Lender or its Applicable Lending Office for any of such Loans by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio or similar requirement relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, such Lender (including any of such
Loans or any deposits referred to in the definition of "Eurodollar
Rate" in Section 1.1 hereof, but excluding the Reserve Requirement to
the extent it is included in the calculation of the Adjusted
Eurodollar Rate); or
(iii) imposes any other condition affecting this Agreement
or the Notes or any of such extensions of credit or liabilities or
commitments.
38
<PAGE> 45
Each Lender will notify the Borrower (with a copy to the Agent) of any
event occurring after the Closing Date which will entitle such Lender
to compensation pursuant to this Section 4.1(a) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and (if so requested by the Borrower) will
designate a different Applicable Lending Office for the Eurodollar
Loans of such Lender if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole
opinion of such Lender, violate any law, rule or regulation or be in
any way disadvantageous to such Lender, provided that such Lender
shall have no obligation to so designate an Applicable Lending Office
located in the U.S. Each Lender will furnish the Borrower with a
certificate setting forth the basis and the amount of each request of
such Lender for compensation under this Section 4.1(a). If any Lender
requests compensation from the Borrower under this Section 4.1(a), the
Borrower may, by notice to such Lender (with a copy to the Agent),
suspend the obligation of such Lender to make or Continue making, or
Convert Prime Rate Loans into, Eurodollar Loans until the Regulatory
Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 4.4 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of
this Section 4.1, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lender which
includes Eurodollar Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if such
Lender so elects by notice to the Borrower (with a copy to the Agent), the
obligation of such Lender to make or Continue making, or Convert Prime Rate
Loans into, Eurodollar Loans hereunder shall be suspended until such Regulatory
Change ceases to be in effect (in which case the provisions of Section 4.4
hereof shall be applicable).
(c) Determinations and allocations by any Lender for purposes of
this Section 4.1 of the effect of any Regulatory Change on its costs of
maintaining its obligation to make Loans or of making or maintaining Loans or
on amounts receivable by it in respect of Loans or Bankers' Acceptances, and of
the additional amounts required to compensate such Lender in respect of any
Additional Costs, shall be conclusive in the absence of manifest error,
provided that such determinations and allocations are made on a reasonable
basis.
Section 4.2 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if with respect to any Eurodollar Loans for any
Interest Period therefor:
(a) The Agent determines (which determination shall be
conclusive absent manifest error) that quotations of interest rates
for the relevant deposits referred to in the definition of "Eurodollar
Rate" in Section 1.1 hereof are not being provided in the relative
amounts or for the relative maturities for purposes of determining the
rate of interest for such Loans as provided in this Agreement; or
(b) Required Lenders determine (which determination shall
be conclusive absent manifest error) and notify the Agent that the
relevant rates of interest referred to in the definition of
"Eurodollar Rate" or "Adjusted Eurodollar Rate" in Section 1.1 hereof
39
<PAGE> 46
on the basis of which the rate of interest for such Loans for such
Interest Period is to be determined do not accurately reflect the cost
to the Lenders of making or maintaining such Loans for such Interest
Period;
then the Agent shall give the Borrower prompt notice thereof and, so long as
such condition remains in effect, the Lenders shall be under no obligation to
make Eurodollar Loans or to Convert Prime Rate Loans into Eurodollar Loans and
the Borrower shall, on the last day(s) of the then current Interest Period(s)
for the outstanding Eurodollar Loans, either prepay such Loans or Convert such
Loans into Prime Rate Loans in accordance with the terms of this Agreement.
Section 4.3 Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans
or (b) maintain Eurodollar Loans, then such Lender shall promptly notify the
Borrower (with a copy to the Agent) thereof and such Lender's obligation to
make or maintain Eurodollar Loans and to Convert Prime Rate Loans into
Eurodollar Loans hereunder shall be suspended until such time as such Lender
may again make and maintain Eurodollar Loans (in which case the provisions of
Section 4.4 hereof shall be applicable).
Section 4.4 Treatment of Affected Loans. If the obligation of
any Lender to make or Continue, or to Convert Prime Rate Loans into, Eurodollar
Loans is suspended pursuant to Section 4.1 or 4.3 hereof, such Lender's
Eurodollar Loans shall be automatically Converted into Prime Rate Loans on the
last day(s) of the then current Interest Period(s) for the Eurodollar Loans
(or, in the case of a Conversion required by Section 4.1(b) or 4.3 hereof, on
such earlier date as such Lender may specify to the Borrower with a copy to the
Agent) and, unless and until such Lender gives notice as provided below that
the circumstances specified in Section 4.1 or 4.3 hereof which gave rise to
such Conversion no longer exist:
(a) To the extent that such Lender's Eurodollar Loans
have been so Converted, all payments and prepayments of principal
which would otherwise be applied to such Lender's Eurodollar Loans
shall be applied instead to its Prime Rate Loans; and
(b) All Loans which would otherwise be made or Continued
by such Lender as Eurodollar Loans shall be made as or Converted into
Prime Rate Loans and all Loans of such Lender which would otherwise be
Converted into Eurodollar Loans shall be Converted instead into (or
shall remain as) Prime Rate Loans.
If such Lender gives notice to the Borrower that the circumstances specified in
Section 4.1 or 4.3 hereof which gave rise to the Conversion of such Lender's
Eurodollar Loans pursuant to this Section 4.4 no longer exist (which such
Lender agrees to do promptly upon such circumstances ceasing to exist) at a
time when Eurodollar Loans are outstanding, such Lender's Prime Rate Loans
shall be automatically Converted, on the first day(s) of the next succeeding
Interest Period(s) for such outstanding Eurodollar Loans, to the extent
necessary so that, after giving effect thereto, all Loans held by the Lenders
holding Eurodollar Loans and by such Lender are held pro rata (as to principal
amounts, Types and Interest Periods) in accordance with their respective
Commitments.
40
<PAGE> 47
Section 4.5 Compensation. The Borrower shall pay to the Agent
for the account of each Lender, promptly upon the request of such Lender
through the Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
(a) Any payment, prepayment or Conversion of a Eurodollar
Loan for any reason (including, without limitation, the acceleration
of the outstanding Loans pursuant to Section 11.2) on a date other
than the last day of an Interest Period for such Loan; or
(b) Any failure by the Borrower for any reason
(including, without limitation, the failure of any conditions
precedent specified in Article 6 to be satisfied) to borrow, Convert
or prepay a Eurodollar Loan on the date for such borrowing, Conversion
or prepayment specified in the relevant notice of borrowing,
prepayment or Conversion under this Agreement.
Section 4.6 Capital Adequacy. If, after the Closing Date, any
Lender shall have determined that the adoption or implementation of any
applicable law, rule or regulation regarding capital adequacy (including,
without limitation, any law, rule or regulation implementing the Basle Accord),
or any change therein, or any change in the interpretation or administration
thereof by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or compliance by such Lender (or its
parent) with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of any central bank or other
Governmental Authority (including, without limitation, any guideline or other
requirement implementing the Basle Accord), has or would have the effect of
reducing the rate of return on such Lender's (or its parent's) capital as a
consequence of its obligations hereunder or the transactions contemplated
hereby to a level below that which such Lender (or its parent) could have
achieved but for such adoption, implementation, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount deemed by such Lender to be material, then from time to time, within
ten Business Days after demand by such Lender (with a copy to the Agent), the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender (or its parent) for such reduction. A certificate of
such Lender claiming compensation under this Section 4.6 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive
absent manifest error, provided that the determination thereof is made on a
reasonable basis. In determining such amount or amounts, such Lender may use
any reasonable averaging and attribution methods.
Section 4.7 Additional Interest on Eurodollar Loans. The
Borrower shall pay, directly to each Lender from time to time, additional
interest on the unpaid principal amount of each Eurodollar Loan held by such
Lender, from the date of the making of such Eurodollar Loan until such
principal amount is paid in full, at an interest rate per annum determined by
such Lender in good faith equal to the positive remainder (if any) of (a) the
Adjusted Eurodollar Rate applicable to such Eurodollar Loan minus (b) the
Eurodollar Rate applicable to such Eurodollar Loan. Each payment of additional
interest pursuant to this Section 4.7 shall be payable by the Borrower on each
date upon which interest is payable on such Eurodollar Loan pursuant to Section
2.4(b); provided, however, that the Borrower shall not be obligated to make any
such payment of additional interest until the first Business Day after the date
when the Borrower has been informed (i) that such Lender is subject to a
Reserve Requirement and (ii) of the amount
41
<PAGE> 48
of such Reserve Requirement (after which time the Borrower shall be obligated
to make all such payments of additional interest, including, without
limitation, such payment of additional interest that otherwise would have been
payable by the Borrower on or prior to such time had the Borrower been earlier
informed).
ARTICLE 5
Security
Section 5.1 Collateral. To secure the full and complete payment
and performance of the Obligations, the Borrower shall, and shall cause each of
its Subsidiaries to, on or before the Funding Date, grant to the Agent for the
benefit of the Agent and the Lenders a perfected, first priority Lien (except
for Permitted Liens, if any, which are expressly permitted by the Loan
Documents to have priority over the Liens in favor of the Agent) on all of its
right, title and interest in and to the following Property, whether now owned
or hereafter acquired, pursuant to the Security Documents:
(a) all Capital Stock of each of the Subsidiaries of the
Borrower (including, without limitation, Parcelway BC) owned as of the
Funding Date or thereafter acquired by the Borrower or any Subsidiary
of the Borrower;
(b) all other Property of the Borrower and each of its
Subsidiaries owned as of the Funding Date or thereafter acquired,
including, without limitation, all accounts (including, without
limitation, Receivables), inventory (including, without limitation,
Inventory), equipment, furniture, fixtures, contract rights, general
intangibles, instruments, investment property, chattel paper, Permits,
Intellectual Property and intercompany Debt, but excluding immaterial
leases (provided, however, that the Agent's Lien on certificated
vehicles shall not be required to be perfected unless and until the
Agent so requests).
If required by the Agent, the pledge of the Capital Stock of Parcelway Canada,
Parcelway BC, Action Delivery, KHB and Zipper shall be appropriately
registered in the share registry of Parcelway Canada, Parcelway BC, Action
Delivery, KHB and Zipper, respectively.
Section 5.2 Guaranties. Each Subsidiary of the Borrower in
existence on the Funding Date (before and after giving effect to the New
Acquisitions) shall guarantee the payment and performance of the Obligations
pursuant to the applicable Guaranty.
Section 5.3 New Subsidiaries; New Issuances of Capital Stock.
Contemporaneously with the creation or acquisition of any Subsidiary of the
Borrower after the Funding Date, the Borrower shall, and shall cause each of
its Subsidiaries to:
(a) grant or cause to be granted to the Agent, for the
benefit of the Agent and the Lenders, a perfected, first priority
security interest in all Capital Stock or other ownership interests in
or indebtedness of such Subsidiary owned by the Borrower or any
Subsidiary of the Borrower (to the extent such Capital Stock or other
ownership interests or indebtedness are already not so pledged to the
Agent);
42
<PAGE> 49
(b) cause each such Subsidiary to guarantee the payment
and performance of the Obligations by executing and delivering to the
Agent an appropriate Guaranty; and
(c) cause each such Subsidiary to execute and deliver to
the Agent an appropriate Security Agreement and such other Security
Documents as the Agent may reasonably request to grant the Agent, for
the benefit of the Agent and the Lenders, a perfected, first priority
Lien (except for Permitted Liens, if any, which are expressly
permitted by the Loan Documents to have priority over the Liens in
favor of the Agent) on all Property of such Subsidiary, excluding
immaterial leases (provided, however, that the Agent's Lien on
certificated vehicles shall not be required to be perfected unless and
until the Agent so requests).
Contemporaneously with the issuance of any additional Capital Stock of any of
the Subsidiaries of the Borrower after the Funding Date, the Borrower shall,
and shall cause each of its Subsidiaries and other appropriate Persons (as
applicable) to, grant or cause to be granted to the Agent, for the benefit of
the Agent and the Lenders, a perfected, first priority security interest in all
Capital Stock or other ownership interests in such Subsidiary owned by any
shareholder of any Subsidiary of the Borrower, the Borrower or any Subsidiary
of the Borrower (to the extent such Capital Stock or other ownership interests
are already not so pledged to the Agent).
Section 5.4 New Mortgaged Properties. The Borrower shall, and
shall cause each of its Subsidiaries to, contemporaneously with the acquisition
of any fee real Property, execute, acknowledge and deliver to the Agent a
Mortgage or an amendment or modification to a then existing Mortgage covering
all fee real Property acquired by the Borrower or any of such Subsidiaries
subsequent to the Closing Date, together with evidence reasonably satisfactory
to the Agent and its counsel, including, without limitation, if requested by
the Agent, a commitment for a mortgagee policy of title insurance or a title
opinion in favor of the Agent, in form and substance reasonably satisfactory to
the Agent, that the Mortgage creates a valid, first priority Lien on the fee
estate in favor of the Agent for the benefit of the Agent and the Lenders
(except for Permitted Liens, if any, which are expressly permitted by the Loan
Documents to have priority over the Liens in favor of the Agent), together with
appraisals and surveys if requested by the Agent; provided, however, that, with
respect to the acquisition of any fee real Property having a fair market value
of less than $100,000, the Borrower and such Subsidiaries shall not be required
to execute, acknowledge or deliver such documents unless or until fee real
Property or Properties having an aggregate fair market value of $100,000 or
more would be covered by any such new Mortgage or amendment or modification to
an existing Mortgage. Following the date of each such acquisition of Property,
if requested by the Agent, the Borrower shall, and shall cause each of its
Subsidiaries with an interest in such Properties to, (a) deliver or cause to be
delivered to the Agent, a mortgagee policy of title insurance insuring the
Liens of the Mortgage covering such fee real Property in an amount reasonably
satisfactory to the Agent on standard form policies (except for Permitted
Liens, if any, which are expressly permitted by the Loan Documents to have
priority over the Liens in favor of the Agent) or, with respect to such
Properties located in Canada, title opinions in form and substance reasonably
satisfactory to the Agent issued by law firms reasonably satisfactory to the
Agent and (b) provide the Agent with a current environmental assessment of such
Property in form and substance reasonably satisfactory to the Agent.
43
<PAGE> 50
Section 5.5 Release of Collateral. Upon any sale, transfer or
other disposition of Collateral that is expressly permitted under Section 9.8
and upon five Business Days prior written request by the Borrower, the Agent
shall execute at the Borrower's expense such documents as may be necessary to
evidence the release by the Agent of its Liens on such Collateral being sold,
transferred or otherwise disposed of; provided, however, that (A) the Agent
shall not be required to release any Lien on any Collateral if a Default shall
have occurred and be continuing, (B) the Agent shall not be required to execute
any such document on terms which, in the Agent's opinion, would expose the
Agent to liability or create any obligation not reimbursed by the Borrower or
entail any consequences other than the release of such Lien without recourse or
warranty, and (C) such release shall not in any manner discharge, affect or
impair any of the Obligations or any of the Agent's Liens on any Collateral
retained by the Borrower or any of its Subsidiaries, including, without
limitation, its Liens on the proceeds of any such sale, transfer or other
disposition.
Section 5.6 Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time
to time, without notice to the Borrower or any other Person (any such notice
being hereby expressly waived by the Borrower and the Loan Parties), to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of the Borrower or any other Loan
Party against any and all of the Obligations of the Borrower or such other Loan
Party now or hereafter existing under this Agreement, any of such Lender's
Notes or any other Loan Document, irrespective of whether or not the Agent or
such Lender shall have made any demand under this Agreement, any of such
Lender's Note or any such other Loan Document and although such Obligations may
be unmatured. Each Lender agrees promptly to notify the Borrower (with a copy
to the Agent) after any such setoff and application, provided that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights and remedies of each Lender hereunder are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which such Lender may have.
ARTICLE 6
Conditions Precedent
Section 6.1 Initial Extension of Credit. The obligation of each
Lender to make its initial Loan under this Agreement and the obligation of the
Issuing Bank to issue the initial Letter of Credit under this Agreement are
subject to the conditions precedent that the Agent shall have received, on or
before the Funding Date, all of the following in form and substance
satisfactory to the Agent and, in the case of actions to be taken, evidence
that the following required actions have been taken to the satisfaction of the
Agent:
(a) Resolutions. Resolutions of the Board of Directors
of each Loan Party certified by its Secretary or an Assistant
Secretary which authorize the execution, delivery and performance by
such Loan Party of the Loan Documents and Related Transactions
Documents to which it is or is to be a party;
44
<PAGE> 51
(b) Incumbency Certificate. A certificate of incumbency
certified by the Secretary or an Assistant Secretary of each Loan
Party certifying the name of each officer or other representative of
such Loan Party (i) who is authorized to sign the Loan Documents to
which such Loan Party is or is to be a party (including any
certificates contemplated therein), together with specimen signatures
of each such officer or other representative, and (ii) who will, until
replaced by other officers or representatives duly authorized for that
purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection
with the Loan Documents and the transactions contemplated thereby;
(c) Articles or Certificates of Incorporation, etc. The
articles or certificates of incorporation, certificate of formation,
certificate of limited partnership, partnership agreement or other
applicable constitutional document of each Loan Party certified by the
Secretary of State or other applicable Governmental Authority of the
state, province or other jurisdiction of incorporation or organization
of such Loan Party and dated as of a Current Date;
(d) Bylaws. The bylaws of each Loan Party certified by
the Secretary or an Assistant Secretary of such Loan Party;
(e) Governmental Certificates. Certificates of
appropriate officials as to the existence and good standing, status or
compliance, as applicable, of each Loan Party in their respective
jurisdictions of incorporation or organization and any and all
jurisdictions where such Loan Party is qualified to do business as a
foreign corporation or other entity, each such certificate to be dated
as of a Current Date;
(f) Assumption Agreement. Counterparts of this Agreement
as executed by each of the New Loan Parties and, if required by the
Agent, an Assumption Agreement executed by each of the New Loan
Parties pursuant to which such New Loan Party agrees to assume all
indebtedness, liabilities and obligations of a Subsidiary of the
Borrower under this Agreement and to become a party to this Agreement;
(g) Notes. The Notes duly completed and executed by the
Borrower (one payable to the order of each Lender);
(h) Guaranties. A Guaranty executed by each of the
Subsidiaries of the Borrower;
(i) Security Agreements. A Security Agreement executed
by the Borrower and each of its Subsidiaries;
(j) Insurance Policies. Copies of all insurance policies
required by this Agreement and the other Loan Documents;
(k) Stock Certificates; Intercompany Notes. The stock
certificates representing all of the issued and outstanding Capital
Stock of each of the Subsidiaries of the Borrower (including, without
limitation, the Capital Stock of the New Loan Parties), in each case
45
<PAGE> 52
accompanied by appropriate instruments of transfer or stock powers
signed in blank (as appropriate) and all promissory notes evidencing
any intercompany Debt between or among the Borrower and any of its
Subsidiaries accompanied by appropriate endorsements thereto executed
by the holder(s) of such promissory notes to and in favor of the
Agent;
(l) Financing Statements. Financing statements and all
other requisite filing documents executed by the Loan Parties
necessary to perfect the Liens created pursuant to the Security
Documents;
(m) Payment of Certain Debt; Lien Releases. Payment in
full of the Existing Loans and all interest accrued thereon, payment
in full of the Air Canada Subordinated Debt and the Shareholders
Subordinated Debt and all interest accrued thereon, termination of all
credit agreements to which any New Loan Party is a party and payment
in full of all Debt for borrowed money of each New Loan Party (other
than Debt payable to the Agent or the Lenders under the Loan
Documents) and duly executed releases of Debt, releases of guaranties
and releases or assignments of Liens, UCC-3 financing statements and
personal property security act filings in recordable form, as may be
necessary to reflect that the Liens created by the Security Documents
are first priority Liens (except for Permitted Liens, if any, which
are expressly permitted by the Loan Documents to have priority over
the Liens in favor of the Agent);
(n) Lien Searches. Lien searches in the names of the
Borrower and each of its Subsidiaries (including, without limitation,
the New Loan Parties) (and in all names under which each such Person
has done business within the last five years and in all names of
Persons who previously owned any of the material Properties
constituting Collateral as the Agent may require) in each state or
province where each such Person maintains an office or has Property,
showing no financing statements or other Lien instruments of record
except for Permitted Liens (and Liens released in accordance with
Section 6.1(m)); provided, however, that no such searches shall be
required with respect to Loan Parties other than the New Loan Parties
if and to the extent that counsel to the Agent determines that such
searches are not reasonably necessary or appropriate given searches
previously undertaken;
(o) Leases. Copies of all material leases (and all
amendments and supplements thereto) pursuant to which the Borrower or
any of its Subsidiaries (including, without limitation, the New Loan
Parties) leases real Properties;
(p) Solvency Certificate; Contribution Agreement. A
certificate executed by a Responsible Officer of the Borrower (with
respect to the Borrower and its Subsidiaries other than Parcelway
Canada and Parcelway BC) and Parcelway Canada (with respect to
Parcelway Canada and its Subsidiaries) demonstrating that,
concurrently with and after giving effect to the Loans and the Related
Transactions, each of the Borrower and each of its Subsidiaries is
Solvent on a consolidated and consolidating basis; and contribution
agreements between and among the Borrower and its Subsidiaries to
evidence applicable rights of contribution;
46
<PAGE> 53
(q) Acquisition Documents. Copies of all Acquisition
Documents, certified by a Responsible Officer of the Borrower as being
true and correct copies of such documents as of the Funding Date;
(r) Dynamex IPO. A true and correct copy of the
Registration Statement and all amendments and supplements thereto; and
the Dynamex IPO shall have been consummated on or before September 30,
1996, pursuant to which the Borrower shall have received $27,000,0000
or more of net cash proceeds;
(s) Consummation of Related Transactions. The Related
Transactions Documents and all agreements, documents and instruments
executed in connection therewith (i) shall be binding and enforceable
against the parties thereto in accordance with their terms and (ii)
shall be satisfactory in form and substance to the Agent and the
Lenders; none of the terms or conditions of such Related Transactions
Documents shall have been amended or modified in any material respect
without the prior written consent of the Agent, and all of the terms
and conditions of such Related Transactions Documents shall have been
satisfied in all material respects without waiver; the New
Acquisitions and other Related Transactions shall have been
consummated currently with the making of the initial Loans on the
Funding Date under this Agreement in accordance in all material
respects with the Acquisition Agreements relating thereto and the
applicable Related Transaction Documents, respectively, and in
compliance in all material respects with all conditions and
requirements contained therein without waiver or exception except as
may have been consented to by the Agent in writing;
(t) Consents. Copies of all material consents necessary
for the execution, delivery and performance by each of the Loan
Parties of the Loan Documents and the Related Transactions Documents
to which it is a party, including, without limitation, any consents or
waivers in connection with the New Acquisitions as the Agent may
require and the grant of a security interest in each Material Contract
of the Borrower or its Subsidiaries, which consents shall be certified
by a Responsible Officer of the applicable Loan Party as true and
correct copies of such consents as of the Funding Date;
(u) Permits. Copies of all material Permits affecting
the Borrower or any of its Subsidiaries in connection with its
businesses or any of the Properties owned or leased by it, and
evidence satisfactory to the Agent that the Borrower and its
Subsidiaries (including, without limitation, the New Loan Parties) are
able to conduct their businesses with the use of such Permits in full
force and effect;
(v) Payment of Fees and Expenses. The Borrower shall
have paid all fees due on or before the Funding Date as specified in
this Agreement or in the Agent's Letter and all fees and expenses of
or incurred by the Agent and its counsel to the extent billed on or
before the Funding Date and payable pursuant to this Agreement;
(w) Regulatory Approvals. Evidence satisfactory to the
Agent that all filings, consents or approvals with or of Governmental
Authorities necessary to consummate the transactions contemplated by
the Loan Documents and the Related Transactions Documents have been
made and obtained, as applicable, including, without limitation, all
47
<PAGE> 54
approvals or filings (if any) required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, the Investment Canada Act (Canada)
and the Competition Act (Canada) and the lapse of all waiting periods
with respect thereto;
(x) Compliance with Laws. As of the Funding Date, each
Person that is a party to this Agreement, any of the other Loan
Documents or any of the Related Transactions Documents shall have
complied with all Governmental Requirements necessary to consummate
the transactions contemplated by this Agreement, the other Loan
Documents and such Related Transactions Documents;
(y) No Prohibitions. No Governmental Requirement shall
prohibit the consummation of the transactions contemplated by this
Agreement, any other Loan Document or any Related Transactions
Document, and no order, judgment or decree of any Governmental
Authority or arbitrator shall, and no litigation or other proceeding
shall be pending or threatened which would, enjoin, prohibit, restrain
or otherwise adversely affect the consummation of the transactions
contemplated by this Agreement, the other Loan Documents and such
Related Transactions Documents or otherwise have a Material Adverse
Effect;
(z) No Material Adverse Change. As of the Funding Date,
no material adverse change shall have occurred with respect to the
financial condition, results of operations, business, operations,
capitalization, liabilities or prospects of the Borrower or any of its
Subsidiaries since April 30, 1996, and the Agent shall be satisfied
that the economic performance of the Borrower and each of its
Subsidiaries (including, without limitation, the New Loan Parties) to
the Funding Date is not materially different from the economic
projections for the Borrower and each of its Subsidiaries through the
Funding Date that were previously submitted to the Agent;
(aa) Financial Statements. Copies of each of the
financial statements referred to in Section 7.2;
(ab) Opinions of Counsel. Favorable opinions (or comfort
letters with respect to clause (iii) succeeding) of (i) Crouch &
Hallett, counsel for the Loan Parties, Smith, Lyons, Torrance,
Stevenson & Mayer, Canadian counsel for the Loan Parties, Stikeman,
Elliott, Canadian counsel for the Agent, and such other counsel as may
be acceptable to the Agent, in form and substance satisfactory to the
Agent, with respect to the Borrower and its Subsidiaries and with
respect to the Loan Documents and the Related Transactions and the
Related Transactions Documents relating thereto, (ii) regulatory
counsel for the Loan Parties as may be acceptable to the Agent, in
form and substance satisfactory to the Agent, regarding licensing and
other regulatory requirements and matters in each of the jurisdictions
in which the Borrower or any of its Subsidiaries operates or will
operate after giving effect to the Related Transactions, and (iii)
such other counsel as may be acceptable to the Agent regarding the
power and authority of each of the Subsidiaries of the Borrower to
execute and deliver its Guaranty and Security Agreement under the laws
of its jurisdiction of incorporation or organization;
48
<PAGE> 55
(ac) Reliance Letters. Copies of all legal
opinions issued in connection with the New Acquisitions and
letters from counsel that issued such opinions stating that
such opinions may be relied upon by the Agent and the Lenders
(or, alternatively, originals of such opinions addressed to
the Agent and the Lenders);
(ad) Accountant's Letter. A letter from the
Borrower authorizing the independent public accountants of the
Borrower and its Subsidiaries to communicate with the Agent and
the Lenders and acknowledging reliance by the Agent and the
Lenders on past, present and future financial statements;
(ae) Schedules. All schedules attached or to be
attached to this Agreement (if any to the extent that such
schedules are not attached as of the execution of this
Agreement) and all supplements to such Schedules that may be
provided as contemplated by Section 13.25 shall be satisfactory
in form and substance to the Agent in its sole discretion; and
(af) Letters of Credit. With respect to the
issuance of a Letter of Credit, a Letter of Credit Agreement in
the form required by the Issuing Bank with respect thereto
executed by the Borrower.
The Borrower shall deliver, or cause to be delivered, to the Agent sufficient
counterparts of each agreement, document or instrument to be received by the
Agent under this Section 6. 1 to permit the Agent to distribute a copy of the
same to each of the Lenders. After the request of the Borrower, the Agent
shall inform the Borrower in writing as to the status of satisfaction of the
conditions precedent set forth in this Section 6.1.
Section 6.2 All Extensions of Credit. The obligation of each
Lender to make any Loan (including the initial Loan) under this Agreement and
the obligation of the Issuing Bank to issue any Letter of Credit (including the
initial Letter of Credit) under this Agreement are subject to the satisfaction
of each of the conditions precedent set forth in Section 6.1 and each of the
following additional conditions precedent:
(a) No Default or Material Adverse Effect. No Default or
Material Adverse Effect shall have occurred and be continuing, or
would result from such Loan or Letter of Credit;
(b) Representations and Warranties. All of the
representations and warranties of the Borrower and its Subsidiaries
and the other Loan Parties contained in Article 7 hereof and in the
other Loan Documents shall be true and correct on and as of the date
of such Loan or Letter of Credit with the same force and effect as if
such representations and warranties had been made on and as of such
date; and
(c) Additional Documentation. The Agent shall have
received such additional approvals, opinions, agreements, documents
and instruments as the Agent may reasonably request.
49
<PAGE> 56
Each notice of borrowing or request for the issuance of a Letter of Credit by
the Borrower hereunder shall constitute a representation and warranty by the
Borrower that the conditions precedent set forth in Sections 6.2(a) and (b)
have been satisfied (both as of the date of such notice and, unless the
Borrower otherwise notifies the Agent prior to the date of such borrowing or
Letter of Credit, as of the date of such borrowing or Letter of Credit).
Section 6.3 Closing Certificates. The Borrower shall,
concurrently with the Funding Date, execute and deliver to the Agent a Closing
Certificate in form and substance satisfactory to the Agent certifying as to
the satisfaction of each of the conditions precedent set forth in Section 6.1
and 6.2 which are required to be satisfied on or before the Funding Date.
ARTICLE 7
Representations and Warranties
Each of the Borrower and each of its Subsidiaries jointly and
severally represents and warrants to the Agent and the Lenders that the
following statements are and, after giving effect to the Related Transactions
and the funding of the initial Loans on the Funding Date, will be true, correct
and complete:
Section 7.1 Corporate Existence. Each Loan Party (a) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, (b) has all
requisite power and authority to own its Properties and carry on its business
as now being or as proposed to be conducted, and (c) is qualified to do
business in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect. Each Loan Party has the power and authority and legal right to
execute, deliver and perform its obligations under the Loan Documents and the
Related Transactions Documents to which it is or may become a party. Prior to
December 29, 1995, neither Dynamex East nor Dynamex West engaged in any
business or incurred any liabilities except for activities, expenses and
liabilities incident to its organization and to the carrying out of the
transactions contemplated by the Mayne Nickless Acquisition Agreement. The
Borrower is a holding company and is not an operating company and does not
engage in any material business operations apart from the ownership and
management of its Subsidiaries.
Section 7.2 Financial Statements.
(a) The Borrower has delivered to the Agent and the Lenders (i)
audited consolidated and consolidating financial statements of the Borrower and
its Subsidiaries as of and for the fiscal years ended July 31, 1993, 1994 and
1995 and interim financial statements as of and for the period ended April 30,
1996 (audited), and (ii) with respect to Mayne Nickless Courier and the New
Loan Parties, the audited and unaudited financial statements of such
corporations which are included in the Registration Statement. To the
Borrower's knowledge, such financial statements are true and correct, have been
prepared in accordance with GAAP or, with respect to the Mayne Nickless
Sellers, generally accepted accounting principles in effect in Australia, and
fairly and accurately present, on a consolidated and consolidating (where
applicable) basis, the financial condition of the Borrower and its consolidated
Subsidiaries or the Mayne Nickless Sellers (or the
50
<PAGE> 57
applicable divisions thereof), as applicable, as of the respective dates
indicated therein and the results of operations for the respective periods
indicated therein. There has not been, as of the Closing Date or the Funding
Date, any material adverse change in the business, condition (financial or
otherwise), operations, prospects or Properties of the Borrower or its
Subsidiaries or of the Mayne Nickless Sellers (or the applicable divisions
thereof) since the effective dates of the most recent applicable financial
statements referred to in this Section 7.2(a).
(b) The Pro-Formas were prepared by the Borrower on a basis
substantially consistent with the financial statements referred to in Section
7.2(a), with only such adjustments thereto as would be required in accordance
with GAAP. Neither the Borrower nor any of its Subsidiaries has any contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or unanticipated losses from any unfavorable commitments except as
referred to or reflected in the Pro-Formas.
(c) The Projections were prepared by the Borrower on a basis
substantially consistent with the financial statements referred to in Section
7.2(a). The Projections represent, as of the Closing Date and the Funding Date,
the good faith estimate of the Borrower and its senior management concerning
the probable financial condition and performance of the Borrower and its
Subsidiaries based on assumptions believed to be reasonable at the time made.
Section 7.3 Corporate Action; No Breach. The execution, delivery
and performance by each Loan Party of the Loan Documents and Related
Transactions Documents to which it is or may become a party and compliance with
the terms and provisions hereof and thereof have been duly authorized by all
requisite corporate or other entity action on the part of the Loan Parties and
do not and will not (a) violate or conflict with, or result in a breach of, or
require any consent under (i) the articles or certificates of incorporation or
bylaws of any Loan Party, (ii) any Governmental Requirement or any order, writ,
injunction or decree of any Governmental Authority or arbitrator, or (iii) any
material agreement, document or instrument to which any Loan Party is a party
or by which any Loan Party or any of its Property is bound or subject, or (b)
constitute a default under any such material agreement, document or instrument,
or result in the creation or imposition of any Lien (except a Lien in favor of
the Agent for and on behalf of the Lenders under the Security Documents as
provided in Article 5) upon any of the revenues or Property of any Loan Party.
Section 7.4 Operation of Business. The Loan Parties possess all
Permits, franchises, licenses and authorizations necessary or appropriate to
conduct their respective businesses substantially as now conducted. All of
such Permits, franchises, licenses and authorizations which are required by any
Governmental Requirement or which are or are to be issued by any Governmental
Authority are disclosed on Schedule 7.4. None of such Persons is in material
violation of any such Permits, franchises, licenses or authorizations.
Section 7.5 Intellectual Property. The Loan Parties own or
possess (or will be licensed or have the full right to use) all Intellectual
Property which is necessary or appropriate for the operation of their
respective businesses as presently conducted and as proposed to be conducted,
without any known conflict with the rights of others. The consummation of the
transactions contemplated by this Agreement, the other Loan Documents and the
Related Transactions Documents will not materially alter or impair,
individually or in the aggregate, any of such rights
51
<PAGE> 58
of such Persons. No product of the Loan Parties infringes upon any
Intellectual Property owned by any other Person, and no claim or litigation is
pending or, to the knowledge of any Loan Party, threatened against any Loan
Party or any such Person contesting its right to use any product or material
which could have a Material Adverse Effect. There is no violation by any Loan
Party of any right of such Loan Party with respect to any material Intellectual
Property owned or used by such Loan Party.
Section 7.6 Litigation and Judgments. Each material action,
suit, investigation or proceeding before or by any Governmental Authority or
arbitrator pending or, to the knowledge of any Loan Party, threatened against
or affecting any Loan Party, or that relates to any of the Related Transactions
as of the Closing Date or the Funding Date, is disclosed on Schedule 7.6. None
of such actions, suits, investigations or proceedings could, if adversely
determined, have a Material Adverse Effect. Except as may be disclosed on
Schedule 7.6, as of the Closing Date and the Funding Date, there are no
outstanding judgments against any Loan Party. No Loan Party has received any
opinion or memorandum or legal advice from legal counsel to the effect that it
is exposed to any liability or disadvantage that could reasonably be expected
to have a Material Adverse Effect.
Section 7.7 Rights in Properties; Liens. Each of the Loan
Parties has good and indefeasible title to or, with respect to leasehold
interests, valid leasehold interests in its Properties and assets, real and
personal, including the Properties, assets and leasehold interests reflected in
the financial statements described in Section 7.2(a) and the Pro Formas, and
none of the Properties or leasehold interests of any Loan Party or any of its
Subsidiaries is subject to any Lien, except Permitted Liens. Except as
disclosed on Schedule 7.7(a), as of the Closing Date and the Funding Date,
neither the Borrower nor any of its Subsidiaries owns any material right, title
or interest in any real Properties. Except as disclosed on Schedule 7.7(b), as
of the Closing Date and the Funding Date, neither the Borrower nor any of its
Subsidiaries owns any right, title or interest of a material nature in
Intellectual Property.
Section 7.8 Enforceability. The Loan Documents and the Related
Transactions Documents have been duly and validly executed and delivered by
each of the Loan Parties that is a party thereto as of the Funding Date, and
such Loan Documents and Related Transaction Documents constitute the legal,
valid and binding obligations of the Loan Parties, enforceable against the Loan
Parties in accordance with their respective terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors' rights and general principles of equity.
Section 7.9 Approvals. No authorization, approval or consent of,
and no filing or registration with or notice to, any Governmental Authority or
third party is or will be necessary for the execution, delivery or performance
by any Loan Party of any of the Loan Documents or Related Transactions
Documents to which it is or will be a party or for the validity or
enforceability thereof, except for such consents, approvals and filings as have
been (or will have been as of the Funding Date) validly obtained or made and
are in full force and effect. The consummation of the Related Transactions
does not require the consent or approval of any other Person, except such
consents and approvals (a) as have been (or will have been as of the Funding
Date) validly obtained and are (or will be as of the Funding Date) in full
force and effect or (b) as to which the failure to obtain is not, individually
or in the aggregate, material. None of the
52
<PAGE> 59
Loan Parties has failed to obtain any material governmental consent, approval,
license, Permit, franchise or other governmental authorization necessary for
the ownership or use of any of its Properties or the conduct of its business.
Section 7.10 Debt. As of the Closing Date, the Loan Parties and
their Subsidiaries have no Debt except for (a) the Obligations, and (b) the
Debt disclosed in paragraph 1 on Schedule 7.10 hereto. As of the Funding Date,
the Loan Parties and their Subsidiaries will have no Debt except for (i) the
Obligations, and (ii) the Debt disclosed in paragraph 2 on Schedule 7.10
hereto.
Section 7.11 Taxes. The Loan Parties have filed all tax returns
(federal, state, provincial and local) required to be filed, including all
income, franchise, employment, Property and sales tax returns, and have paid
all of their respective liabilities for taxes, assessments, governmental
charges and other levies that are due and payable. None of the Loan Parties is
aware of any pending investigation of any Loan Party or, immediately prior to
the Mayne Nickless Acquisition, any Mayne Nickless Seller or any of their
respective Subsidiaries, by any taxing authority or of any pending but
unassessed tax liability of any Loan Party or, immediately prior to the Mayne
Nickless Acquisition, any Mayne Nickless Seller or any of their respective
Subsidiaries, other than with respect to (a) ad valorem or other real property
taxes not in excess of $10,000 as to any such Person and (b) other taxes in an
aggregate amount as to any such Person which could not, if an adverse
determination is made with respect to such taxes, materially and adversely
affect such Person, which (as to each of clauses (a) and (b) preceding) are
currently being contested in good faith by appropriate proceedings diligently
conducted by or on behalf of such Person and as to which, if required by GAAP,
such Person has established adequate reserves. No tax Liens have been filed
and, except as disclosed on Schedule 7.11, no claims are being asserted against
any Loan Party or, immediately prior to the Mayne Nickless Acquisition, any
Mayne Nickless Seller or any of their respective Subsidiaries, with respect to
any taxes. Except as disclosed on Schedule 7.11 hereto, as of the Closing Date
and the Funding Date, none of the U.S. or Canadian income tax returns of the
Loan Parties and, to the Borrower's knowledge immediately prior to the Mayne
Nickless Acquisition, any Mayne Nickless Seller or any of their respective
Subsidiaries are under audit. The charges, accruals and reserves on the books
of the Loan Parties in respect of taxes or other governmental charges are in
accordance with GAAP.
Section 7.12 Margin Securities. None of the Loan Parties or any
of their respective Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any Loan will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock.
Section 7.13 ERISA; Canadian Plans. Neither any Loan Party nor
any ERISA Affiliate maintains or contributes to, or has any obligation under,
any Pension Plan or Canadian Pension Plan other than the Pension Plans and
Canadian Pension Plans identified on Schedule 7.13. Each Plan and Canadian
Plan of each Loan Party is in compliance in all material respects with all
applicable provisions of ERISA and the Code or of Canadian Pension and Benefits
Law, as the case may be. Neither a Reportable Event nor a Prohibited
Transaction has occurred within the last 60 months with respect to any Plan.
No event has occurred or investment has been made which could render any Loan
Party, Canadian Plan or funding agent thereof liable for any tax
53
<PAGE> 60
or penalty under Canadian Pension and Benefits Law. No notice of intent to
terminate a Pension Plan or Canadian Pension Plan has been filed, nor has any
Pension Plan or Canadian Pension Plan been terminated. No circumstances exist
which constitute grounds entitling the PBGC or a Canadian Pension Authority to
institute proceedings to terminate, or appoint a trustee to administer, a
Pension Plan or Canadian Pension Plan, nor has the PBGC or a Canadian Pension
Authority instituted any such proceedings. Neither any of the Loan Parties nor
any ERISA Affiliate has completely or partially withdrawn from a Multiemployer
Plan. Each Loan Party and each ERISA Affiliate have met their minimum funding
requirements under ERISA and the Code or under Canadian Pension and Benefits
Law with respect to all of their Plans or Canadian Plans subject to such
requirements, and, as of the Closing Date and the Funding Date except as
specified on Schedule 7.13, the present value of all tested benefits under each
funded Plan or funded Canadian Plan (exclusive of any Multiemployer Plan) does
not and will not exceed the fair market value of all such Plan or Canadian Plan
assets allocable to such benefits, as determined on the most recent valuation
date of such Plan or Canadian Plan and in accordance with ERISA or Canadian
Pension and Benefits Law, as the case may be. Neither any of the Loan Parties
nor any ERISA Affiliate has incurred any liability to the PBGC under ERISA or
to the PBGF. No litigation is pending or threatened concerning or involving
any Plan or Canadian Plan. There are no unfunded or unreserved liabilities (on
either a going-concern basis or a wind-up basis) relating to any Plan or
Canadian Plan that could, individually or in the aggregate, have a Material
Adverse Effect if such Loan Party were required to fund or reserve such
liability in full. As of the Closing Date and the Funding Date, no funding
waivers have been or will have been requested or granted under Section 412 of
the Code with respect to any Plan. No unfunded or unreserved liability for
benefits under any Plan or Plans or Canadian Plan or Canadian Plans (exclusive
of any Multiemployer Plans) exceeds $1,000,000 or Cdn. $1,000,000, with
respect to any such Plan or Canadian Plan, respectively, or $2,000,000 or Cdn.
$2,000,000 with respect to all such Plans or Canadian Plans, respectively, in
the aggregate as of the Closing Date and the Funding Date, on either a
going-concern basis or a wind-up basis.
Section 7.14 Disclosure. No written statement, information,
report, representation or warranty made by any Loan Party in any Loan Document
or Related Transaction Document or furnished to the Agent or any Lender by any
Loan Party in connection with the Loan Documents or the Related Transactions
Documents or any transaction contemplated hereby or thereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known
to any Loan Party which has had a Material Adverse Effect, and there is no fact
known to any Loan Party which might in the future have a Material Adverse
Effect, except as may have been disclosed in writing to the Agent and the
Lenders.
Section 7.15 Capitalization.
(a) On and as of the Funding Date, the authorized Capital Stock,
the par value per share and the number of shares issued and outstanding with
respect to the Capital Stock of each of the Loan Parties, other than the
Borrower, are as specified on Schedule 7.15 hereto. The Borrower will, as of
the Funding Date, own all of the issued and outstanding Capital Stock of each
of Parcelway Canada, Dynamex East, Dynamex West, Seidel Delivery, Now Courier,
Seko, YS, Attention Messenger and Southbank. Parcelway Canada will, as of the
Funding Date, own all of the issued and outstanding Capital Stock of each of
Parcelway BC, Action Delivery and
54
<PAGE> 61
KHB. KHB will, as of the Funding Date, own all of the issued and outstanding
Capital Stock of Zipper.
(b) On and as of the Funding Date, (i) the Borrower will have no
Subsidiaries other than Parcelway Canada, Parcelway BC, Dynamex East, Dynamex
West, Action Delivery, Seidel Delivery, Now Courier, Seko, YS, Attention
Messenger, Southbank Courier, KHB and Zipper, (ii) Parcelway Canada will have
no Subsidiaries other than Parcelway BC, Action Delivery, KHB and Zipper, (iii)
KHB will have no Subsidiaries other than Zipper, and (iv) no Subsidiary of the
Borrower will have any Subsidiaries except as specified in clauses (ii) and
(iii) preceding.
(c) All of the issued and outstanding Capital Stock of the
Subsidiaries of the Borrower has been validly issued and is fully paid and
nonassessable. There are no outstanding subscriptions, options, warrants,
calls or rights (including preemptive rights) to acquire, and no outstanding
securities or instruments convertible into, Capital Stock of any of the
Subsidiaries of the Borrower.
Section 7.16 Agreements. None of the Loan Parties is a party to
any indenture, loan, credit agreement, stock purchase agreement or any lease or
other agreement, document or instrument, or subject to any charter or corporate
restriction, that could have a Material Adverse Effect. None of the Loan
Parties is in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement, document or instrument binding on it or its Properties, except for
instances of noncompliance that, individually or in the aggregate, could not
have a Material Adverse Effect.
Section 7.17 Compliance with Laws. None of the Loan Parties is in
violation of any Governmental Requirement, except for instances of
non-compliance that, individually or in the aggregate, could not have a
Material Adverse Effect.
Section 7.18 Investment Company Act. None of the Loan Parties is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 7.19 Public Utility Holding Company Act. None of the Loan
Parties is a "holding company" or a "subsidiary company" of a "holding company"
or an "affiliate" of a "holding company" or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.20 Environmental Matters.
(a) Except for instances of noncompliance with or exceptions to
any of the following representations and warranties that could not have,
individually or in the aggregate, a Material Adverse Effect:
(i) The Loan Parties and all of their respective
Properties and operations are in full compliance with all
Environmental Laws. Neither the Borrower nor any of its Subsidiaries
is aware of, and neither the Borrower nor any of its Subsidiaries has
received written notice of, any past, present or future conditions,
events, activities, practices or
55
<PAGE> 62
incidents which may interfere with or prevent the compliance or
continued compliance by any Loan Party with all Environmental Laws;
(ii) The Loan Parties have obtained all Permits that are
required under applicable Environmental Laws, and all such Permits are
in good standing and all such Persons are in compliance with all of
the terms and conditions thereof;
(iii) No Hazardous Materials exist on, about or within or
have been (to the knowledge of any Loan Party) or are being used,
generated, stored, transported, disposed of on or Released from any of
the Properties of the Loan Parties except in compliance with
applicable Environmental Laws. The use which the Loan Parties make
and intend to make of their respective Properties will not result in
the use, generation, storage, transportation, accumulation, disposal
or Release of any Hazardous Material on, in or from any of their
Properties except in compliance with applicable Environmental Laws;
(iv) Neither the Loan Parties nor any of their respective
currently or previously owned or leased Properties or operations are
subject to any outstanding or, to the knowledge of any Loan Party,
threatened order from or agreement with any Governmental Authority or
other Person or subject to any judicial or administrative proceeding
with respect to (A) any failure to comply with Environmental Laws, (B)
any Remedial Action, or (C) any Environmental Liabilities;
(v) There are no conditions or circumstances associated
with the currently or previously owned or leased Properties or
operations of the Loan Parties that could reasonably be expected to
give rise to any Environmental Liabilities or claims resulting in any
Environmental Liabilities. None of the Loan Parties is subject to, or
has received written notice of any claim from any Person alleging that
any of the Loan Parties is or will be subject to, any Environmental
Liabilities;
(vi) None of the Properties of the Loan Parties is a
treatment facility (except for the recycling of Hazardous Materials
generated on-site and the treatment of liquid wastes subject to the
Clean Water Act or other applicable Environmental Law of Canada for
temporary storage of Hazardous Materials generated on-site prior to
their disposal off-site) or disposal facility requiring a permit under
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., regulations thereunder or any comparable provision of state or
Canadian federal or provincial law. The Loan Parties and their
Subsidiaries are compliance with all applicable financial
responsibility requirements of all Environmental Laws; and
(vii) None of the Loan Parties has failed to file any
notice required under applicable Environmental Law reporting a
Release.
(b) No Lien arising under any Environmental Law that could have,
individually or in the aggregate, a Material Adverse Effect has attached to any
Property or revenues of any Loan Party.
56
<PAGE> 63
Section 7.21 Labor Disputes and Acts of God. Neither the business
nor the Properties of any Loan Party are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that is having or could have a Material
Adverse Effect.
Section 7.22 Material Contracts. Attached hereto as Schedule 7.22
is a complete list, as of the Closing Date and the Funding Date, of all
Material Contracts of the Loan Parties, other than the Loan Documents. All of
the Material Contracts are in full force and effect and none of the Loan
Parties is in default under any Material Contract and, to the knowledge of the
Loan Parties after due inquiry, no other Person that is a party thereto is in
default under any of the Material Contracts. None of the Material Contracts
prohibit the transactions contemplated under the Loan Documents or the Related
Transactions Documents. Except as may be provided on Schedule 7.22, (a) each
of the Material Contracts has been transferred or assigned to, or are currently
in the name of, a Loan Party and (b) each of the Material Contracts is
assignable to the Agent as collateral and is assignable by the Agent to a
transferee if an Event of Default were to occur. The Borrower has delivered to
the Agent a complete and current copy of each Material Contract (other than
purchase orders entered into in the ordinary course of business) existing on
the Closing Date and, with respect to each Material Contract (other than
purchase orders entered into in the ordinary course of business) entered into
after the Closing Date, will deliver to the Agent a complete and current copy
of such Material Contract in a reasonably prompt fashion after the creation
thereof.
Section 7.23 Bank Accounts. As of the Closing Date and the
Funding Date, Schedule 7.23 sets forth the account numbers and location of all
bank accounts (including lock box and special accounts) of the Borrower and its
Subsidiaries.
Section 7.24 Outstanding Securities. As of the Closing Date and
the Funding Date, all outstanding securities (as defined in the Securities Act
of 1933, as amended, or any successor thereto, and the rules and regulations of
the Securities and Exchange Commission thereunder) of the Loan Parties have
been offered, issued, sold and delivered in compliance with all applicable
Governmental Requirements.
Section 7.25 Related Transactions Documents.
(a) All representations and warranties made by the Loan Parties in
the Related Transactions Documents and, to the knowledge of the Loan Parties
after due inquiry, all representations and warranties made by all other Persons
in the Related Transactions Documents, are true and correct in all material
respects on and as of each date made or deemed made and as of the Closing Date
and the Funding Date. No rights of cancellation or rescission and, to the
knowledge of the Loan Parties, no defaults or defenses exist with respect to
any of the Related Transactions Documents. The Borrower has delivered to the
Agent complete and correct copies of all Related Transactions Documents,
including all schedules and exhibits thereto. The Related Transactions
Documents set forth the entire agreement and understanding of the parties
thereto relating to the subject matter thereof, and there are no other
agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby.
57
<PAGE> 64
(b) As of the Funding Date, all conditions precedent to the
Related Transactions pursuant to the Related Transactions Documents have been
fulfilled in all material respects or (with the prior written consent of the
Agent) waived, the Related Transactions Documents have not been amended or
otherwise modified in any material respect (except as permitted by this
Agreement), and there has not been any breach of any material term or condition
contained in the Related Transactions Documents. After giving effect to the
consummation of the New Acquisitions on the Funding Date, the Borrower will
have acquired and become the owner of all of the issued and outstanding Capital
Stock of each of the New Loan Parties free and clear of any Liens, except the
Liens securing the Obligations in favor of the Agent for and on behalf of the
Lenders. In connection with the New Acquisitions, neither the Borrower nor any
of its Subsidiaries has assumed or will assume any liabilities other than those
required to be assumed by the Borrower in accordance with the express terms and
provisions of the New Acquisitions Agreements, all of which assumed liabilities
are reflected or reserved against in the applicable Pro Forma or are contingent
liabilities which are not required to be reflected or reserved against in
accordance with GAAP. Except as set forth in Schedule 7.25, all approvals,
authorizations, consents, licenses, exemptions of, filings or registrations
with any Governmental Authority or other Person required in connection with the
New Acquisitions will have been obtained as of the Funding Date (including,
without limitation, notification under the Investment Canada Act, the approvals
of the appropriate transportation regulation authorities (including the
Pennsylvania Public Utility Commission and the Washington Utilities and
Transportation Commission) and any necessary licenses to operate the acquired
businesses in the applicable locations on and after the Funding Date). None of
the approvals, authorizations, consents, licenses, exemptions, filings,
registrations or other actions which has not been obtained will, individually
or in the aggregate with all such approvals, authorizations, consents,
licenses, exemptions, filings, registrations or other actions which have not
been obtained, materially adversely affect the businesses of the New Loan
Parties.
(c) None of the Related Transactions to occur on or about the
Closing Date or the Funding Date will violate any term or provision of the
Prior Acquisition Documents and no approval, authorization, consent or other
action by any party to the Prior Acquisition Documents is necessary for the
consummation of the Related Transactions to occur on or about the Closing Date
or the Funding Date.
Section 7.26 Solvency. Each of the Borrower and each of its
Subsidiaries, as a separate entity, is Solvent, both before and after giving
effect to the Loans and the Related Transactions.
Section 7.27 Employee Matters. Except as set forth on Schedule
7.27, as of the Closing Date and the Funding Date (a) none of the Loan Parties
or any of its respective Subsidiaries or employees is subject to any collective
bargaining agreement, and (b) no petition for certification or union election
is pending with respect to the employees of any Loan Party or any of its
respective Subsidiaries, and no union or collective bargaining unit has sought
such certification or recognition with respect to the employees of any of the
Loan Parties or any of its respective Subsidiaries. There are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
the Loan Parties after due inquiry, threatened against, any of the Loan Parties
or its respective employees which could have, either individually or in the
aggregate, a Material Adverse Effect. Except as set forth on Schedule 7.27, as
of the Closing Date and the
58
<PAGE> 65
Funding Date, none of the Loan Parties or any of its respective Subsidiaries is
subject to an employment contract.
Section 7.28 Insurance. Schedule 7.28 sets forth a complete and
accurate description of all policies of insurance that will be in effect as of
the Closing Date and the Funding Date for the Borrower and its Subsidiaries.
To the extent such policies have not been replaced, no notice of cancellation
has been received for such policies and the Borrower and its Subsidiaries are
in compliance with all of the terms and conditions of such policies.
Section 7.29 Common Enterprise. Each of the Borrower and its
Subsidiaries is a member of an affiliated group with each other such Person and
the Borrower and its Subsidiaries are collectively engaged in a common
enterprise with one another. Each of the Borrower and its Subsidiaries expects
to derive substantial benefit (and may reasonably be expected to derive
substantial benefit), directly and indirectly, from the Loans and Letters of
Credit contemplated by this Agreement, both in its separate capacity and as a
member of an affiliated and integrated group. Each of the Borrower and its
Subsidiaries will receive reasonably equivalent value in exchange for the
Collateral and Guaranty being provided by it as security for the payment and
performance of the Obligations.
ARTICLE 8
Affirmative Covenants
Each of the Borrower and each of its Subsidiaries jointly and
severally covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or any Lender has any Commitment hereunder or any
Letter of Credit remains outstanding, it will perform and observe, or cause to
be performed and observed, the following covenants:
Section 8.1 Reporting Requirements. The Borrower will furnish to
the Agent and each Lender:
(a) Annual Financial Statements. As soon as available,
and in any event within 120 days after the end of each fiscal year of
the Borrower, beginning with the fiscal year ending July 31, 1996, (i)
a copy of the annual audit report of the Borrower and its consolidated
Subsidiaries as of the end of and for such fiscal year then ended
containing, on a consolidated basis and with unaudited consolidating
schedules attached, balance sheets and statements of income, retained
earnings and cash flow, in each case setting forth in comparative form
the figures for the preceding fiscal year, all in reasonable detail
and audited and certified by Deloitte & Touche or other independent
certified public accountants of recognized standing acceptable to the
Agent and containing no qualification thereto except as may be
reasonably acceptable to the Agent, to the effect that such report has
been prepared in accordance with GAAP and (ii) a certificate of such
independent certified public accountants to the Agent (A) stating that
to their knowledge no Default has occurred and is continuing or, if in
their opinion a Default has occurred and is continuing, stating the
nature thereof, and (B) confirming the calculations set forth in the
officer's certificate referred to in Section 8.1(d) delivered
concurrently therewith;
59
<PAGE> 66
(b) Quarterly Financial Statements. As soon as
available, and in any event within 45 days after the end of each of
the quarters of each fiscal year of the Borrower, beginning with the
fiscal quarter ending July 31, 1996, a copy of (i) an unaudited
financial report of the Borrower and its consolidated Subsidiaries as
of the end of such fiscal quarter and for the portion of the fiscal
year then ended containing, on a consolidated basis, balance sheets
and statements of income, retained earnings and cash flow, in each
case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail certified by a Responsible Officer of the Borrower to have been
prepared in accordance with GAAP and to fairly and accurately present
(subject to year-end audit adjustments) the financial condition and
results of operations of the Borrower and its consolidated
Subsidiaries, on a consolidated basis, at the date and for the periods
indicated therein and (ii) management's financial reports comparing
actual financial results for the period to the current budget for the
period;
(c) Compliance Certificate. Concurrently with the
delivery of each of the financial statements referred to in Sections
8.1(a) and 8.1(b), a Compliance Certificate of a Responsible Officer
of the Borrower substantially in the form of Exhibit D hereto,
appropriately completed, (i) stating that, to the best of such
officer's knowledge, no Default has occurred and is continuing or, if
a Default has occurred and is continuing, stating the nature thereof
and the action that has been taken and is proposed to be taken with
respect thereto, and (ii) showing in reasonable detail the
calculations demonstrating compliance with Article 10;
(d) Applicable Margin Certificate. Concurrently with the
delivery of each of the financial statements referred to in Section
8.1(b), a certificate of a Responsible Officer of the Borrower showing
in reasonable detail the calculation of the Applicable Margin as of
the next Calculation Date;
(e) Receivables Agings, Etc. As soon as available and in
any event within 45 days after the end of each fiscal quarter, and, in
any event from time to time upon the request of the Agent, an aged
trial balance of all then-existing Receivables and all then-existing
accounts payable of the Borrower and its Subsidiaries;
(f) Budget. As soon as available and in any event before
the beginning of each fiscal year of the Borrower, a copy of the
budget of the Borrower and its Subsidiaries for such fiscal year
(segregated by fiscal quarter and setting forth all material
assumptions);
(g) Management Letters. Promptly upon any request
therefor by the Agent, a copy of any management letter or written
report submitted to any Loan Party by independent certified public
accountants with respect to the business, condition (financial or
otherwise), operations, prospects or Properties of any such Person;
(h) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits and proceedings
before any Governmental Authority or arbitrator
60
<PAGE> 67
affecting any Loan Party which, if determined adversely to any such
Person, could have a Material Adverse Effect;
(i) Notice of Default. As soon as possible and in any
event immediately upon (i) any Loan Party's knowledge of the
occurrence of any Default a written notice setting forth the details
of such Default and the action that such Loan Party has taken and
proposes to take with respect thereto and (ii) the failure of the
Borrower to make any required payment of principal, premium (if any),
interest or other payment of or with respect to any Subordinated Debt
or the occurrence of any other default or event of default with
respect to any Subordinated Debt, a written notice setting forth the
details thereof and the action that the Borrower has taken or proposes
to take with respect thereto;
(j) ERISA and Canadian Plan Reports. Promptly after the
filing or receipt thereof, copies of all reports, including annual
reports, and notices which any Loan Party or any of its ERISA
Affiliates files with or receives from the PBGC or the U.S. Department
of Labor under ERISA or the PBGF or a Canadian Pension Authority under
Canadian Pension and Benefits Law; and as soon as possible and in any
event within five days after any such Person knows or has reason to
know that any Pension Plan or Canadian Pension Plan is insolvent, or
that any Reportable Event or Prohibited Transaction has occurred with
respect to any Plan or Multiemployer Plan, or that any tax or penalty
could become payable under Canadian Pension and Benefits Law with
respect to any Canadian Plan, or that the PBGC, any Canadian Pension
Authority, any Loan Party or any ERISA Affiliate has instituted or
will institute proceedings under ERISA or Canadian Pension and
Benefits Law to terminate or withdraw from or reorganize any Pension
Plan or Canadian Pension Plan, a certificate of a Responsible Officer
of such Loan Party setting forth the details as to such insolvency,
withdrawal, Reportable Event, Prohibited Transaction, tax or penalty
or termination and the action that such Loan Party has taken and
proposes to take with respect thereto;
(k) Reports to Other Creditors. Promptly after the
furnishing thereof, a copy of any statement or report furnished by any
Loan Party to any other party pursuant to the terms of any indenture,
loan, stock purchase or credit or similar agreement and not otherwise
required to be furnished to the Agent and the Lenders pursuant to any
other subsection of this Section 8.1;
(l) Notice of Material Adverse Effect. Within five
Business Days after any Loan Party becomes aware thereof, written
notice of any matter that could reasonably be expected to have a
Material Adverse Effect;
(m) Proxy Statements, Etc. As soon as available, one
copy of each financial statement, report, notice or proxy statement
sent by any Loan Party to its stockholders generally and one copy of
each regular, periodic or special report, registration statement or
prospectus filed by any Loan Party with any securities exchange or the
Securities and Exchange Commission or any successor agency, and of all
press releases and other statements made by any of the Loan Parties to
the public containing material developments in its business;
61
<PAGE> 68
(n) Notice of New Properties and Subsidiaries.
Concurrently with the delivery of each of the financial statements
referred to in Sections 8.1(a) and 8.1(b), notice of (i) any real
Property acquired by the Borrower or any of its Subsidiaries, (ii) any
additional patents, copyrights and trademarks of a material nature,
and any other Intellectual Property of a material nature of which the
Agent should be aware in order to ensure its Lien thereon, acquired by
the Borrower or any of its Subsidiaries, and (iii) the creation or
acquisition of any Subsidiary of Borrower or any of its Subsidiaries
after the Closing Date of which the Agent has not been previously
informed in writing;
(o) Appraisals. From time to time if the Agent
determines that such appraisals are required to comply with applicable
Governmental Requirements or to syndicate the Loans, appraisals of the
real Properties of the Borrower and its Subsidiaries reasonably
satisfactory in form and substance to the Agent (which appraisals
shall be at the expense of the Borrower except if and to the extent
that such appraisals are required by the Agent on more than two
occasions during any fiscal year of Borrower);
(p) Insurance. Within 60 days prior to the end of each
fiscal year of the Borrower, a report in form and substance reasonably
satisfactory to the Agent summarizing all material insurance coverage
maintained by the Borrower and its Subsidiaries as of the date of such
report and all material insurance coverage planned to be maintained by
such Persons in the subsequent fiscal year;
(q) Plan Information. From time to time, as reasonably
requested by the Agent or any Lender, such books, records and other
documents relating to any Pension Plan or Canadian Pension Plan as the
Agent or any Lender shall specify; prior to any termination, partial
termination or merger of a Pension Plan or Canadian Pension Plan
covering employees of any Loan Party or any ERISA Affiliate, or a
transfer of assets of a Pension Plan or Canadian Pension Plan covering
employees of any Loan Party or any ERISA Affiliate, written
notification thereof; promptly upon any Loan Party's receipt thereof,
a copy of any determination letter or advisory opinion regarding any
Pension Plan or Canadian Pension Plan received from any Governmental
Authority and any amendment or modification thereto as may be
necessary as a condition to obtaining a favorable determination letter
or advisory opinion; and promptly upon the occurrence thereof, written
notification of any action requested by any Governmental Authority to
be taken as a condition to any such determination letter or advisory
opinion;
(r) Environmental Assessments and Notices. Promptly
after the receipt thereof, a copy of each environmental assessment
(including any analysis relating thereto) prepared with respect to any
real Property of any Loan Party and each notice sent by any
Governmental Authority relating to any failure or alleged failure to
comply with any Environmental Law or any liability with respect
thereto;
(s) Purchase Price Adjustment. Within five days after
any material post-closing adjustment to the purchase price is agreed
to in accordance with any New Acquisition Agreement, notification of
such post-closing adjustment to the purchase price agreed to in
accordance with any such Acquisition Agreement; and
62
<PAGE> 69
(t) General Information. Promptly, such other
information concerning the Loan Parties and their respective
Subsidiaries, the creditworthiness of the Loan Parties and/or the
Collateral as the Agent or any Lender may from time to time reasonably
request.
Section 8.2 Maintenance of Existence Conduct of Business. Each
of the Loan Parties will, and will cause each of its Subsidiaries to, preserve
and maintain its corporate or other entity existence (except for mergers of
Subsidiaries permitted by Section 9.3) and all of its material leases,
privileges, licenses, Permits, franchises, qualifications, Intellectual
Property, intangible Property and rights that are necessary or appropriate in
the ordinary conduct of its business. Each of the Loan Parties will, and will
cause each of its Subsidiaries to, conduct its business in an orderly and
efficient manner in accordance with good business practices.
Section 8.3 Maintenance of Properties. Each of the Loan Parties
will, and will cause each of its Subsidiaries to, maintain, keep and preserve
all of its material Properties necessary or appropriate in the proper conduct
of its business in good repair, working order and condition (ordinary wear and
tear excepted) and make all necessary repairs, renewals, replacements,
betterments and improvements thereof.
Section 8.4 Taxes and Claims. Each of the Loan Parties will, and
will cause each of its Subsidiaries to, pay or discharge at or before maturity
or before becoming delinquent (a) all taxes, levies, assessments and
governmental charges imposed on it or its income or profits or any of its
Property and (b) all lawful claims for labor, material and supplies, which, if
unpaid, might become a Lien upon any of its Property; provided, however, that
neither the Borrower nor any of its Subsidiaries shall be required to pay or
discharge any tax, levy, assessment or governmental charge or claim for labor,
material or supplies whose amount, applicability or validity is being contested
in good faith by appropriate proceedings being diligently pursued and for which
adequate reserves have been established under GAAP.
Section 8.5 Insurance. (a) Each of the Loan Parties will, and
will cause each of its Subsidiaries to, keep insured by financially sound and
reputable insurers all Property of a character usually insured by responsible
corporations engaged in the same or a similar business similarly situated
against loss or damage of the kinds and in the amounts customarily insured
against by such corporations or entities and carry such other insurance as is
usually carried by such corporations or entities, provided that in any event
each of the Borrower and its Subsidiaries (as appropriate) will maintain:
(i) Property Insurance -- Insurance against loss or damage
covering substantially all of the tangible real and personal
Property and improvements of the Borrower and each of its
Subsidiaries by reason of any Peril (as defined below) in such
amounts (subject to any deductibles as shall be satisfactory
to the Agent) as shall be reasonable and customary and
sufficient to avoid the insured named therein from becoming a
co-insurer of any loss under such policy, but in any event in
such amounts as are reasonably available as determined by the
Borrower's independent insurance broker reasonably acceptable
to the Agent.
63
<PAGE> 70
(ii) Automobile Liability Insurance for Bodily Injury and Property
Damage --Insurance in respect of all vehicles (whether owned,
hired or rented by the Borrower or any of its Subsidiaries) at
any time located at, or used in connection with, its
Properties or operations against liabilities for bodily injury
and Property damage in such amounts as are then customary for
vehicles used in connection with similar Properties and
businesses, but in any event to the extent required by
applicable law.
(iii) Comprehensive General Liability Insurance -- Insurance against
claims for bodily injury, death or Property damage occurring
on, in or about the Property (and adjoining streets, sidewalks
and waterways) of the Borrower and its Subsidiaries, in such
amounts as are then customary for Property similar in use in
the jurisdictions where such Properties are located.
(iv) Worker's Compensation Insurance -- Worker's compensation
insurance (including employers' liability insurance) to the
extent required by applicable law, which may be self-insurance
to the extent permitted by applicable law.
Such insurance shall be written by financially responsible companies selected
by the Borrower and having an A.M. Best Rating of "A-" or better and being in a
financial size category of "VI" or larger, or by other companies reasonably
acceptable to the Agent. Each policy referred to in this Section 8.5 shall
provide that it will not be canceled, amended or reduced except after not less
than 30 days' prior written notice to the Agent and shall also provide that the
interests of the Agent and the Lenders shall not be invalidated by any act or
negligence of the Borrower or any of its Subsidiaries. The Borrower will
advise the Agent promptly of any policy cancellation, reduction or amendment.
For purposes hereof, the term "Peril" shall mean, collectively, fire,
lightning, flood, windstorm, hail, explosion, riot and civil commotion,
vandalism and malicious mischief, damage from aircraft, vehicles and smoke and
other perils covered by the "all-risk" endorsement then in use in the
jurisdictions where the Properties of the Borrower and its Subsidiaries are
located.
(b) The Borrower will cause each Insurance Recovery (other than
any portion of an Insurance Recovery payable to a landlord to repair or replace
Property leased by the Borrower or any of its Subsidiaries) payable by any
insurance company during the Term Period to be deposited promptly with the
Agent as security for the Obligations if a Default has then occurred and is
continuing, and will pay all Excess Insurance Proceeds to the Agent for
application against the Obligations if and to the extent required in accordance
with Section 2.7(a).
(c) If a Default shall have occurred and be continuing, the
Borrower will cause all proceeds of insurance paid on account of the loss of or
damage to any Property of the Borrower or any of its Subsidiaries and all
awards of compensation for any Property of the Borrower or any of its
Subsidiaries taken by condemnation or eminent domain to be paid directly to the
Agent to be applied against or held as security for the Obligations, at the
election of the Agent and the Required Lenders.
Section 8.6 Inspection Rights. Each of the Loan Parties will,
and will cause each of its Subsidiaries to, permit representatives and agents
of the Agent and each Lender, during normal
64
<PAGE> 71
business hours and upon reasonable notice to the Borrower, to examine, copy and
make extracts from its books and records, to visit and inspect its Properties
and to discuss its business, operations and financial condition with its
officers and independent certified public accountants. The Borrower will
authorize its accountants in writing (with a copy to the Agent) to comply with
this Section 8.6. The Agent or its representatives may, at any time and from
time to time at the Borrower's expense, conduct field exams for such purposes
as the Agent may reasonably request; provided, however, that, prior to the
occurrence of a Default, no more than three such field exams during any fiscal
year shall be at the Borrower's expense.
Section 8.7 Keeping Books and Records. Each of the Loan Parties
will, and will cause each of its Subsidiaries to, maintain appropriate books of
record and account in accordance with GAAP consistently applied in which true,
full and correct entries will be made of all their respective dealings and
business affairs. If any changes in accounting principles from those used in
the preparation of the financial statements referenced in Section 8.1 are
hereafter required or permitted by GAAP and are adopted by the Borrower or any
of its Subsidiaries with the concurrence of its independent certified public
accountants and such changes in GAAP result in a change in the method of
calculation or the interpretation of any of the financial covenants, standards
or terms found in Section 8.1 or Article 10 or any other provision of this
Agreement, the Borrower and the Required Lenders agree to amend any such
affected terms and provisions so as to reflect such changes in GAAP with the
result that the criteria for evaluating the Borrower's or such Subsidiaries'
financial condition shall be the same after such changes in GAAP as if such
changes in GAAP had not been made; provided that, until any necessary
amendments have been made, the certificate required to be delivered under
Section 8.1(c) hereof demonstrating compliance with Article 10 shall include
calculations setting forth the adjustments from the relevant items as shown in
the current financial statements based on the changes to GAAP to the
corresponding items based on GAAP as used in the financial statements
referenced in Section 7.2(a), in order to demonstrate how such financial
covenant compliance was derived from the current financial statements.
Section 8.8 Compliance with Laws. Each of the Loan Parties will,
and will cause each of its Subsidiaries to, comply with all applicable
Governmental Requirements, except for instances of noncompliance that could not
have, individually or in the aggregate, a Material Adverse Effect.
Section 8.9 Compliance with Agreements. Each of the Loan Parties
will, and will cause each of its Subsidiaries to, comply with all agreements,
documents and instruments binding on it or affecting its Properties or
business, except for instances of noncompliance that could not have,
individually or in the aggregate, a Material Adverse Effect. Each of the Loan
Parties will comply with all terms and provisions of the Subordinated Debt
Documents which are intended to benefit the holders of the Loans or any other
senior Debt.
Section 8.10 Further Assurances. Each of the Loan Parties will,
and will cause each of its Subsidiaries to, execute and deliver such further
agreements, documents and instruments and take such further action as may be
requested by the Agent to carry out the provisions and purposes of this
Agreement and the other Loan Documents, to evidence the Obligations and to
create, preserve, maintain and perfect the Liens of the Agent for the benefit
of itself and the Lenders in and to the Collateral and the required priority of
such Liens.
65
<PAGE> 72
Section 8.11 ERISA; Canadian Plans. Each of the Loan Parties
will, and will cause the Borrower and each of its ERISA Affiliates to, comply
with all minimum funding requirements and all other material requirements of
ERISA and Canadian Pension and Benefits Law, if applicable, so as not to give
rise to any liability thereunder.
Section 8.12 Trade Accounts Payable. Each of the Loan Parties
will, and will cause the Borrower and each of its Subsidiaries to, pay all
trade accounts payable before the same become more than 90 days past due,
except (a) trade accounts payable contested in good faith or (b) trade accounts
payable in an aggregate amount not to exceed at any time outstanding $250,000
and with respect to which no proceeding to enforce collection has been
commenced or, to the knowledge of any Loan Party, threatened.
Section 8.13 Unified Cash Management System. If required by the
Agent, the Borrower and each of its Subsidiaries will maintain a unified cash
management system and will ensure, and will cause the Borrower and each of its
Subsidiaries to ensure, that all proceeds of all Collateral are (a) deposited
directly, as received, into a collection account of the Borrower or such
Subsidiary (as applicable) and (b) on a daily basis after such deposit,
transferred into a Concentration Account of the Borrower or such Subsidiary (as
applicable). If required by the Agent, each of the Loan Parties will maintain
in effect, and will cause each of its Subsidiaries to maintain in effect, an
agreement governing each of its collection accounts and its Concentration
Account in form and substance satisfactory to the Agent with a depository bank
satisfactory to the Agent.
Section 8.14 Indemnifications under Acquisition Documents. In the
event that, after the occurrence and during the continuation of a Default, the
Borrower or any of its Subsidiaries is or becomes aware of any material right
or claim (or probable right or claim) of indemnification in favor of it arising
under any of the Acquisition Documents which it does not intend to pursue
within reasonable promptness after it has become aware thereof, then (a) the
Borrower will promptly notify the Agent and the Lenders of such fact and the
basis of such right or claim in reasonable detail and (b) upon the request of
the Agent or the Required Lenders, the Borrower will execute and deliver and/or
cause its appropriate Subsidiary to execute and deliver (as applicable) a power
of attorney in form and substance reasonably satisfactory to the Agent pursuant
to which the Agent may, in the name of the Borrower or any of its Subsidiaries
(as applicable), take all actions that may be necessary or appropriate to
diligently pursue such right or claim.
Section 8.15 Ownership of Subsidiaries. Except if and to the
extent that such Loan Parties are merged or wound-up as permitted by Section
9.3 of this Agreement, the Borrower shall at all times on and after the Funding
Date own all issued and outstanding Capital Stock of Parcelway Canada, Dynamex
East, Dynamex West, Seidel Delivery, Now Courier, Seko, YS, Attention Messenger
and Southbank Courier, Parcelway Canada shall at all times on and after the
Funding Date own all issued and outstanding Capital Stock of Parcelway B.C.,
Action Delivery and KHB, and KHB shall at all times on and after the Funding
Date own all issued and outstanding Capital Stock of Zipper.
Section 8.16 Use of Proceeds of the Dynamex IPO. The Borrower
shall, promptly upon consummation of the Dynamex IPO, cause a portion of the
proceeds thereof to be used to (a) pay
66
<PAGE> 73
the Air Canada Subordinated Debt and the Shareholders Subordinated Debt in full
and (b) to pay the cash portion of the New Acquisitions in full.
ARTICLE 9
Negative Covenants
Each of the Borrower and each of its Subsidiaries jointly and
severally covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or any Lender has any Commitment hereunder or any
Letter of Credit remains outstanding, it will perform and observe, or cause to
be performed and observed, the following covenants:
Section 9.1 Debt. Each of the Loan Parties will not, and will
not permit or any of its Subsidiaries to, incur, create, assume or permit to
exist any Debt, except:
(a) Debt of the Borrower and its Subsidiaries to the
Lenders pursuant to the Loan Documents;
(b) Permitted Subordinated Debt;
(c) intercompany Debt between or among the Borrower and
any of its Wholly-Owned Subsidiaries incurred in the ordinary course
of business (including, without limitation, Debt owed by the
Wholly-Owned Subsidiaries of the Borrower to the Borrower in
connection with loans of proceeds of the Loans made by the Borrower to
such Subsidiaries, the proceeds of which loans are used for the
purposes permitted by Section 2.10), subject to the following
requirements: any and all of the Debt permitted pursuant to this
Section 9.1(e) shall be unsecured, shall be evidenced by instruments
satisfactory to the Agent which will be pledged to the Agent for the
benefit of the Agent and the Lenders and shall be subordinated to the
Obligations pursuant to a subordination agreement in form and
substance satisfactory to the Agent, provided, however, that temporary
advances made from time to time in the ordinary course of business not
to exceed $100,000 in aggregate principal amount at any time owing by
any Wholly-Owned Subsidiary of the Borrower to the Borrower shall not
be required to be so evidenced, pledged or subordinated;
(d) unsecured Debt under Interest Rate Protection
Agreements not to exceed $500,000 in aggregate notional amount,
provided that each counterparty shall be rated in one of the two
highest rating categories of Standard and Poors Corporation or Moody's
Investors Service, Inc.;
(e) (i) existing Debt described on Schedule 7.10 hereto
and renewals, extensions or refinancings of such Debt which do not
increase the outstanding principal amount of such Debt and the terms
and provisions of which are not materially more onerous than the terms
and conditions of such Debt on the Closing Date (provided, however,
that the Debt consisting of the Existing Loans, the Air Canada
Subordinated Debt and the Shareholders Subordinated Debt which is to
be paid in full on the Funding Date shall be excluded for purposes of
this clause (i) on and after the Funding Date), (ii)
67
<PAGE> 74
purchase money Debt secured by purchase money Liens, which Debt and
Liens are permitted under and meet all of the requirements of clause
(g) of the definition of Permitted Liens contained in Section 1.1, and
(iii) additional unsecured Debt; provided, however, that the aggregate
principal amount of the Debt referred to in this Section 9.1(e) shall
not exceed $3,200,000 in aggregate amount at any time outstanding; and
(f) liabilities of the Loan Parties in respect of
unfunded vested benefits under any Plan if and to the extent that the
existence of such liabilities will not constitute, cause or result in
a Default.
Section 9.2 Limitation on Liens. Each of the Loan Parties will
not, and will not permit any of its Subsidiaries to, incur, create, assume or
permit to exist any Lien upon any of its Property or revenues, whether now
owned or hereafter acquired, except Permitted Liens.
Section 9.3 Mergers, Etc. Each of the Loan Parties will not, and
will not permit any of its Subsidiaries to, (a) become a party to a merger or
consolidation, (b) wind-up, dissolve or liquidate itself, or (c) purchase or
acquire all or a material or substantial part of the Capital Stock or business
or Properties of any Person (other than pursuant to the New Acquisitions);
provided, however, that:
(i) any Subsidiary of the Borrower may merge with the
Borrower or a Wholly-Owned Subsidiary of the Borrower if (but
only if) (A) the Borrower or such Wholly-Owned Subsidiary,
respectively, is the surviving corporation in such merger, (B)
the surviving corporation in such merger, if a Wholly-Owned
Subsidiary of the Borrower, shall be incorporated in a state
of the U.S. unless the non-surviving corporation(s) in such
merger are not incorporated in a state of the U.S., (C) at the
time of such merger, each of the Subsidiaries of the Borrower
which are parties to such merger is Solvent, and (D) no
Default exists at the time of such merger or would result
therefrom;
(ii) the Borrower and its Wholly-Owned Subsidiaries
may, subject to compliance with the requirements of Sections
5.3 and 5.4, purchase or acquire all or a material or
substantial part of the Capital Stock or business or
Properties of another Person (including by way of a merger) if
(but only if) (A) the aggregate amount or fair market value of
the consideration paid or payable (inclusive of any
indebtedness, liabilities or obligations assumed but exclusive
of any trade payables assumed except to the extent that the
aggregate amount of such trade payables assumed exceeds the
aggregate amount of accounts receivable acquired in connection
with the particular transaction) by the Borrower and its
Subsidiaries in connection therewith does not exceed
$8,000,000 during any 12-month period or such greater amount
as may be expressly approved by the Required Lenders, (B) the
aggregate amount of the Loan proceeds that may be used to
finance such purchases and acquisitions does not exceed
$6,000,000 during any 12-month period or such greater amount
as may be expressly approved by the Required Lenders, (C) if
such purchase or acquisition is effectuated pursuant to a
merger, the Borrower (if the Borrower is a party thereto) or
the Wholly-Owned Subsidiary of the Borrower (if such
Wholly-Owned Subsidiary is a party thereto) shall be the
68
<PAGE> 75
entity surviving such merger, (D) concurrently with such
purchase or acquisition, each of the Borrower, any
Wholly-Owned Subsidiary that is a party thereto and (if a
purchase or acquisition of Capital Stock is involved) the
entity acquired (the "Acquired Entity") executes a written
agreement in form and substance satisfactory to the Agent
pursuant to which the Acquired Entity agrees that the
representations, warranties, covenants and agreements
contained in this Agreement which apply or relate to the New
Acquisitions, the New Acquisition Agreements and the New Loan
Parties shall also apply or relate to such purchase or
acquisition, the agreements, documents and instruments
executed and/or delivered in connection therewith and such
Acquired Entity in all material respects as if the same were a
New Acquisition, a New Acquisition Agreement and a New Loan
Party, respectively, and (E) no Default exists at the time of
such purchase, acquisition or merger, as applicable, or would
result therefrom; and
(iii) each of Action Delivery, KHB and Zipper may
be wound-up with and into Parcelway Canada (or, with respect
to Zipper, KHB and then Parcelway Canada) if (but only if) (A)
Action Delivery, KHB and Zipper, respectively, is Solvent at
the time of such winding-up and is promptly dissolved after
such winding-up and (B) no Default exists at the time of such
winding-up or would result therefrom.
Section 9.4 Restricted Payments. Each of the Loan Parties will
not, and will not permit any of its Subsidiaries to, make any Restricted
Payments, except:
(a) subject to the subordination provisions relating
thereto, the Borrower may make regularly scheduled payments of
interest accrued on any Permitted Subordinated Debt and may pay
principal of Permitted Subordinated Debt if and to the extent (but
only if and to the extent) permitted by the express terms of the
Subordinated Debt Documents governing such Permitted Subordinated
Debt, which terms have been expressly approved in writing by the
Agent;
(b) Subsidiaries of the Borrower owned by the Borrower
may declare and pay dividends to the Borrower to the extent permitted
by applicable law;
(c) Subsidiaries of the Borrower owned by Subsidiaries of
the Borrower may declare and pay dividends to their parent
Subsidiaries to the extent permitted by applicable law;
(d) the Borrower may purchase shares of Dynamex Common
Stock from employees of the Borrower or its Subsidiaries upon the
termination of the employment of such employees, provided that the
amount paid therefor shall not exceed the fair market value of such
shares to be purchased and shall not exceed $100,000 in the aggregate
during any fiscal year; and
(e) the Borrower may declare and pay dividends to its
shareholders during any fiscal year in an aggregate amount not to
exceed 25% of Net Income during the immediately preceding fiscal year;
69
<PAGE> 76
provided, however, that no Restricted Payments may be made pursuant to
clauses (a), (d) or (e) preceding if a Default exists at the time of
such Restricted Payment or would result therefrom.
Section 9.5 Investments. Each of the Loan Parties will not, and
will not permit any of its Subsidiaries to, make or permit to remain
outstanding any advance, loan, extension of credit or capital contribution to
or investment in any Person, or purchase or own any stock, bonds, notes,
debentures or other securities of any Person, or be or become a joint venturer
with or partner of any Person (all such transactions being herein called
"Investments"), except:
(a) Investments in obligations or securities received in
settlement of debts (created in the ordinary course of business) owing
to the Borrower or any of its Subsidiaries;
(b) existing Investments identified on Schedule 9.5
hereto;
(c) Investments in securities issued or guaranteed by the
U.S. or, with respect to Parcelway Canada, Action Delivery, Zipper and
KHB and their Subsidiaries, Canada or any agency thereof with
maturities of one year or less from the date of acquisition;
(d) Investments in certificates of deposit and Eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any Lender or
with any domestic commercial bank having capital and surplus in excess
of $500,000,000;
(e) Investments in repurchase obligations with a term of
not more than seven days for securities of the types described in
clause (c) preceding with any Lender or with any domestic commercial
bank having capital and surplus in excess of $500,000,000;
(f) Investments in commercial paper of a domestic issuer
rated A-1 or better or P-1 or better by Standard & Poor's Corporation
or Moody's Investors Services, Inc., respectively, maturing not more
than six months from the date of acquisition;
(g) (i) Investments (other than Intercompany Debt
referred to in clause (h) below) by a Loan Party in its Subsidiaries
existing on the Closing Date and (ii) additional Investments by a Loan
Party in its Subsidiaries made after the Closing Date in an aggregate
amount, as to each such Borrower, not to exceed $1,000,000 at any time
outstanding, exclusive of the Borrower's Investment in the New Loan
Parties pursuant to the New Acquisitions and exclusive of Investments
resulting from purchases and acquisitions permitted pursuant to clause
(ii) of Section 9.3; provided, however, that the aggregate amount of
Investments that may be made after the Closing Date in Parcelway
Canada, Action Delivery, Zipper or KHB or any of their Subsidiaries or
in any other non-U.S. Subsidiary of the Borrower shall not exceed
$500,000;
(h) Intercompany Debt permitted pursuant to Section
9.1(e); and
70
<PAGE> 77
(i) Investments by the Borrower or its Subsidiary in
companies whose Capital Stock or assets are proposed to be purchased
or acquired by the Borrower or such Subsidiary in accordance with
clause (ii) of Section 9.3 not to exceed $500,000 in aggregate amount
during any fiscal year; provided, however, that the Borrower shall
promptly notify the Agent of any such Investment exceeding $100,000 in
aggregate amount;
provided, however, that no Investments may be made by any Loan Party pursuant
to clauses (g), (h) or (i) preceding if a Default exists at the time of such
Investment or would result therefrom.
Section 9.6 Limitation on Issuance of Capital Stock of
Subsidiaries. Each of the Loan Parties will not permit any of the Subsidiaries
of the Borrower to at any time issue, sell, assign or otherwise dispose of (a)
any of its Capital Stock, (b) any securities exchangeable for or convertible
into or carrying any rights to acquire any of its Capital Stock, or (c) any
option, warrant or other right to acquire any of its Capital Stock; provided,
however, that, if and to the extent not otherwise prohibited by this Agreement
or the other Loan Documents (i) a Subsidiary of the Borrower may issue
additional shares of its Capital Stock to the Borrower for full and fair
consideration and (ii) any Subsidiary of a Subsidiary of the Borrower may issue
additional shares of its Capital Stock to such parent Subsidiary or another
Subsidiary of the Borrower if and to the extent that the percentage ownership
of such Capital Stock owned by the owners thereof as of the Closing Date does
not change; provided, further, however, that all of such additional shares of
Capital Stock referred to in clauses (i) and (ii) preceding shall be pledged to
the Agent, on behalf of the Agent and the Lenders, as security for the
Obligations pursuant to a pledge agreement in form and substance reasonably
satisfactory to the Agent.
Section 9.7 Transactions with Affiliates. Except for (a) the
payment of salaries in the ordinary course of business consistent with prudent
business practices and (b) the furnishing of employment benefits in the
ordinary course of business consistent with prudent business practices, each of
the Loan Parties will not, and will not permit any of its Subsidiaries to,
enter into any transaction, including, without limitation, the purchase, sale
or exchange of Property or the rendering of any service, with any Affiliate of
such Loan Party or such Subsidiary except in the ordinary course of and
pursuant to the reasonable requirements of such Loan Party's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
such Loan Party or such Subsidiary, respectively, than would be obtained in a
comparable arms-length transaction with a Person not an Affiliate of such Loan
Party or such Subsidiary, respectively.
Section 9.8 Disposition of Property. Each of the Loan Parties
will not, and will not permit any of its Subsidiaries to, sell, lease, assign,
transfer or otherwise dispose of any of its Property, except:
(a) dispositions of Inventory in the ordinary course of
business;
(b) Asset Dispositions of Property, other than accounts
and Receivables, by the Borrower and its Subsidiaries to Persons other
than the Borrower and its Subsidiaries made in the ordinary course of
business if each of the following conditions have been satisfied: (i)
the Net Proceeds from any single Asset Disposition or series of
related Asset Dispositions in any fiscal year of the Borrower do not
exceed $250,000 and the
71
<PAGE> 78
cumulative Net Proceeds from all Asset Dispositions do not exceed
$1,000,000, (ii) the Borrower or its Subsidiary (as applicable)
receives fair consideration for such assets, and (iii) no Default
exists at the time of or will result from such Asset Disposition;
(c) Asset Dispositions of Property, other than accounts
and Receivables, by the Borrower and its Subsidiaries to any
Wholly-Owned Subsidiary of the Borrower if each of the following
conditions have been satisfied: (i) the aggregate fair market value of
the assets sold, disposed of or otherwise transferred by the Borrower
and its Subsidiaries and transferred to a Wholly-Owned Subsidiary of
the Borrower shall not exceed $250,000 in aggregate amount during any
fiscal year, exclusive of assets acquired pursuant to purchases and
acquisitions permitted pursuant to clause (ii) of Section 9.3 which
are transferred by the purchaser of such assets to the Borrower or any
Wholly-Owned Subsidiary of the Borrower, (ii) the assets sold,
disposed of or otherwise transferred to a Wholly-Owned Subsidiary of
the Borrower shall continue to be subject to a perfected, first
priority Lien (except for Permitted Liens, if any, which are expressly
permitted by the Loan Documents to have priority over the Liens in
favor of the Agent) in favor of the Agent and the Lenders, and (iii)
no Default exists at the time of or will result from such Asset
Disposition; and
(d) dispositions of Property, other than accounts and
Receivables, no longer used or useful in the ordinary course of
business.
Section 9.9 Sale and Leaseback. Each of the Loan Parties will
not, and will not permit any of its Subsidiaries to, enter into any arrangement
with any Person pursuant to which it leases from such Person real or personal
Property that has been or is to be sold or transferred, directly or indirectly,
by it to such Person.
Section 9.10 Lines of Business. Each of the Loan Parties will
not, and will not permit any of its Subsidiaries to, (a) engage in any line or
lines of business activity other than the businesses in which they are engaged
on the Closing Date or the Funding Date and lines of business reasonably
related thereto or (b) discontinue any line or lines of business which provide
material revenues to the Borrower (on a consolidated basis) in which they are
engaged on the Closing Date or the Funding Date.
Section 9.11 Environmental Protection. Each of the Loan Parties
will not, and will not permit any of its Subsidiaries to, (a) use (or permit
any tenant to use) any of its Properties for the handling, processing, storage,
transportation or disposal of any Hazardous Material except in compliance with
applicable Environmental Laws, (b) generate any Hazardous Material except in
compliance with applicable Environmental Laws, (c) conduct any activity that is
likely to cause a Release or threatened Release of any Hazardous Material in
violation of any Environmental Law, or (d) otherwise conduct any activity or
use any of its Properties in any manner, that violates or is likely to violate
any Environmental Law or create any Environmental Liabilities for which the
Borrower or any of its Subsidiaries would be responsible, except for
circumstances or events described in clauses (a) through (d) preceding that
could not, individually or in the aggregate, have a Material Adverse Effect.
72
<PAGE> 79
Section 9.12 Intercompany Transactions. Except as may be
expressly permitted or required by the Loan Documents, each of the Loan Parties
will not, and will not permit any of its Subsidiaries to, create or otherwise
cause or permit to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary to (a) pay dividends
or make any other distribution to the Borrower or any of its Subsidiaries in
respect of such Subsidiary's Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, (b) pay any
indebtedness owed to the Borrower or any of its Subsidiaries, (c) make any loan
or advance to the Borrower or any of its Subsidiaries, (d) participate in the
Unified Cash Management System, or (e) sell, lease or transfer any of its
Property to the Borrower or any of its Subsidiaries.
Section 9.13 Modification of Other Agreements. Each of the Loan
Parties will not, and will not permit any of its Subsidiaries to, consent to or
implement any termination, amendment, modification, supplement or waiver of (a)
the Acquisition Documents, (b) the certificate or articles of incorporation or
bylaws (or analogous constitutional documents) of the Borrower or any of its
Subsidiaries, or (c) any other Material Contract to which it is a party or any
Permit which it possesses; provided, however, that the Borrower and its
Subsidiaries may amend or modify (i) the documents referred to in clause (b)
preceding if and to the extent that such amendment or modification is not
substantive or material and could not be adverse to the Agent or the Lenders
and (ii) the Material Contracts referred to in clause (c) preceding if and to
the extent that such amendment or modification could not reasonably be expected
to be materially adverse to the Borrower and its Subsidiaries or the Agent and
the Lenders.
Section 9.14 Bank Accounts. Each of the Loan Parties will not,
and will not permit any of its Subsidiaries to, create or maintain any bank
accounts other than those listed on Schedule 7.23 hereto or consented to in
writing by the Agent, which consent shall not be unreasonably withheld.
Section 9.15 ERISA and Canadian Plans. Each of the Loan Parties
will not, and will not permit any of its Subsidiaries to:
(a) allow, or take (or permit any ERISA Affiliate to
take) any action which would cause, any unfunded or unreserved
liability for benefits under any Plan (exclusive of any Multiemployer
Plan) or Canadian Plan to exist or to be created that exceeds $250,000
with respect to any such Plan or $500,000 with respect to all such
Plans or Canadian Plans in the aggregate on either a going concern or
a wind-up basis; or
(b) with respect to any Multiemployer Plan, allow, or
take (or permit any ERISA Affiliate to take) any action which would
cause, any unfunded or unreserved liability for benefits under any
Multiemployer Plan to exist or to be created, either individually as
to any such Plan or in the aggregate as to all such Plans, that could,
upon any partial or complete withdrawal from or termination of any
such Multiemployer Plan or Plans, have a Material Adverse Effect.
73
<PAGE> 80
ARTICLE 10
Financial Covenants
Each of the Borrower and each of its Subsidiaries jointly and
severally covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or any Lender has any Commitment hereunder or any
Letter of Credit remains outstanding, it will perform and observe, or cause to
be performed and observed, the following covenants:
Section 10.1 Ratio of Senior Funded Debt to EBITDA. The Borrower
and its Subsidiaries will not permit the ratio, calculated as of the end of
each fiscal quarter of the Borrower commencing with the fiscal quarter ended
July 31, 1996, of (i) Senior Funded Debt to (ii) EBITDA for the four fiscal
quarters of the Borrower then ended, or, if calculated as of the end of any
fiscal quarter ended prior to January 31, 1997, for the period consisting of
the greatest number of fiscal quarters ended subsequent to the Funding Date on
an annualized basis, to be greater than 2.75 to 1.00.
Section 10.2 Fixed Charge Coverage Ratio. The Borrower and its
Subsidiaries will not permit the Fixed Charge Coverage Ratio, calculated as of
the end of each fiscal quarter of the Borrower commencing with the fiscal
quarter ended July 31, 1996, for the four fiscal quarters of the Borrower then
ended, or, if calculated as of the end of any fiscal quarter ended prior to
January 31, 1997, for the period consisting of the greatest number of fiscal
quarters ended subsequent to the Funding Date on an annualized basis, to be
less than 1.50 to 1.00.
Section 10.3 Capital Expenditures. The Borrower and its
Subsidiaries will not permit the aggregate Capital Expenditures of the Borrower
and its Subsidiaries during any fiscal year (exclusive of Capital Expenditures
deemed to have occurred as a result of the New Acquisitions and any purchase or
acquisition of Capital Stock or assets permitted by clause (ii) of Section 9.3)
to exceed 25% of EBIT during the immediately preceding fiscal year.
ARTICLE 11
Default
Section 11.1 Events of Default. Each of the following shall be
deemed an "Event of Default":
(a) The Borrower shall fail to pay, repay or prepay when
due any amount of principal or interest owing to the Agent or any
Lender pursuant to this Agreement or any other Loan Document, or any
Loan Party shall fail to pay within five days after the due date
thereof any fee, expense or other amount or other Obligation owing to
the Agent or any Lender pursuant to this Agreement or any other Loan
Document.
(b) Any representation or warranty made or deemed made by
the Borrower or any of its Subsidiaries or by any Loan Party in any
Loan Document or in any certificate, report, notice or financial
statement furnished at any time in connection with this
74
<PAGE> 81
Agreement or any other Loan Document shall be false, misleading or
erroneous in any material respect when made or deemed to have been
made.
(c) The Borrower or any of its Subsidiaries shall fail to
perform, observe or comply with any covenant, agreement or term
contained in Sections 5.1, 5.2, 8.1(i), 8.1(l), 8.2 (other than the
last sentence of Section 8.2), 8.6, 8.7, 8.8, 8.9 or 8.10, Article 9
or Article 10 of this Agreement; the Borrower or any of its
Subsidiaries shall fail to perform, observe or comply with any
covenant, agreement or term contained in Sections 5.3, 8.1 (other than
Sections 8.1(i) or 8.1(l)), 8.4, 8.5, 8.13 or 8.14 and such failure is
not remedied or waived within ten days after such failure commenced;
the Borrower or any of its Subsidiaries shall fail to perform, observe
or comply with any covenant, agreement or term contained in any
Security Agreement, subject to any (if any) grace period applicable to
such covenant, agreement or term contained in such Security Agreement;
any Guarantor shall fail to perform, observe or comply with any
covenant, agreement or term contained in its Guaranty, subject to any
(if any) grace period applicable to such covenant, agreement or term
in this Agreement to the extent this Agreement is incorporated therein
by reference; or any Loan Party shall fail to perform, observe or
comply with any other covenant, agreement or term contained in this
Agreement or any other Loan Document (other than covenants to pay the
Obligations) and such failure is not remedied or waived within the
earlier to occur of 30 days after such failure commenced or, if a
different grace period is expressly made applicable in such other Loan
Documents, such applicable grace period.
(d) Any of the Loan Parties ceases to be Solvent or shall
admit in writing its inability to, or be generally unable to, pay its
debts as such debts become due.
(e) Any Loan Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner, liquidator or the like of itself or of all or any
substantial part of its Property, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under
the United States Bankruptcy Code or the Bankruptcy and Insolvency Act
(Canada) (individually and collectively, as now or hereafter in
effect, the "Bankruptcy Code"), (iv) institute any proceeding or file
a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
winding-up or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate or other action for the
purpose of effecting any of the foregoing.
(f) A proceeding or case shall be commenced, without the
application, approval or consent of any of the Loan Parties in any
court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of any
of the Loan Parties or of all or any substantial part of its Property,
or (iii) similar relief in respect of any of the Loan Parties under
any law relating to bankruptcy, insolvency, reorganization, winding-up
or composition or adjustment of debts, and such proceeding or case
shall continue
75
<PAGE> 82
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 or more days; or an order for relief against any of
the Loan Parties shall be entered in an involuntary case under the
Bankruptcy Code.
(g) Any of the Loan Parties shall fail to discharge
within a period of 30 days after the commencement thereof any
attachment, sequestration, forfeiture or similar proceeding or
proceedings involving an aggregate amount in excess of $250,000
against any of its Properties.
(h) A final judgment or judgments for the payment of
money in excess of $250,000 in the aggregate shall be rendered by a
court or courts against the Loan Parties or any of them on claims not
covered by insurance or as to which the insurance carrier has denied
responsibility and the same shall not be discharged, or a stay of
execution thereof shall not be procured, within five days from the
date of entry thereof and the Loan Parties shall not, within said
period of five days, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal.
(i) Any of the Loan Parties shall fail to pay when due
any principal of or interest on any Debt (other than the Obligations)
having (either individually or in the aggregate) a principal amount of
at least $500,000, or the maturity of any such Debt shall have been
accelerated, or any such Debt shall have been required to be prepaid
prior to the stated maturity thereof, or any event shall have occurred
(and shall not have been waived or otherwise cured) that permits (or,
with the giving of notice or lapse of time or both, would permit) any
holder or holders of such Debt or any Person acting on behalf of such
holder or holders to accelerate the maturity thereof or require any
such prepayment.
(j) This Agreement or any other Loan Document shall cease
to be in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or
challenged by any Loan Party or any of its shareholders, or any Loan
Party shall deny that it has any further liability or obligation under
any of the Loan Documents, or any Lien created or purported to be
created by the Loan Documents shall for any reason cease to be or fail
to be a valid, first priority perfected Lien (except for Permitted
Liens, if any, which are expressly permitted by the Loan Documents to
have priority over the Liens in favor of the Agent) upon any of the
Collateral purported to be covered thereby.
(k) Any of the following events shall occur or exist with
respect to any Loan Party or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan or any event or investment which could
reasonably be expected to render any Loan Party, Canadian Plan or
funding agent thereof liable for any tax or penalty under Canadian
Pension and Benefits Law; (ii) any Reportable Event with respect to
any Pension Plan; (iii) the filing under Section 4041 of ERISA or
under Canadian Pension and Benefits Law of a notice of intent to
terminate any Pension Plan or Canadian Pension Plan or the termination
of any Pension Plan or Canadian Pension Plan; (iv) any event or
circumstance
76
<PAGE> 83
that could reasonably be expected to constitute grounds entitling the
PBGC or a Canadian Pension Authority under Canadian Pension and
Benefits Law to institute proceedings under Section 4042 of ERISA or
under Canadian Pension and Benefits Law for the termination of, or for
the appointment of a trustee to administer, any Pension Plan or
Canadian Pension Plan, or the institution by the PBGC or a Canadian
Pension Authority under Canadian Pension and Benefits Law of any such
proceedings; (v) any "accumulated funding deficiency" (as defined in
Section 406 of ERISA or Section 412 of the Code), whether or not
waived, shall exist with respect to any Plan; or (vi) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a Plan or
the reorganization, insolvency or termination of any Pension Plan or
Canadian Pension Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, have
subjected or could in the reasonable opinion of Required Lenders
subject any Loan Party or any ERISA Affiliate to any tax, penalty or
other liability to a Plan, a Multiemployer Plan, the PBGC, a Canadian
Plan, the PBGF or otherwise (or any combination thereof) which in the
aggregate exceed or could reasonably be expected to exceed $500,000.
(l) If, at any time, the subordination provisions of any
of the Subordinated Debt Documents shall be invalidated or shall
otherwise cease to be in full force and effect.
(m) The occurrence of (i) a default under (including,
without limitation, a "Default" as such term is used or defined in)
any Subordinated Debt Document, unless (A) such default has been
waived, cured or consented to in accordance with such documents, (B)
such default is not a payment default, (C) the maturity of the Debt
affected thereby has not been accelerated, (D) a blockage under such
Subordinated Debt Document has not been invoked, and (E) such waiver
or consent is not made in connection with any amendment or
modification of any such Subordinated Debt Documents or in connection
with any payment to the holders of any Subordinated Debt, (ii) a
payment default under (including, without limitation, a payment
"Default" as such term is used or defined in) any Subordinated Debt
Document, (iii) an event of default under (including, without
limitation, an "Event of Default" as such term is used or defined in)
any Subordinated Debt Document, or (iv) any acceleration of the
maturity of any Subordinated Debt.
(n) If, at any time, any event or circumstance shall
occur which gives any holder of any Subordinated Debt the right to
request or require the Borrower or any of its Subsidiaries to redeem,
purchase or prepay any Subordinated Debt (other than the consummation
of the Dynamex IPO which shall give the Borrower the right to prepay
the Shareholders Subordinated Debt).
(o) The occurrence of any Material Adverse Effect.
(p) Richard K. McClelland shall cease to be the chief
executive officer of the Borrower and shall not be promptly replaced
in such capacity by an individual acceptable to the Agent.
77
<PAGE> 84
Section 11.2 Remedies. If any Event of Default shall occur and be
continuing, the Agent may and, if directed by the Required Lenders, the Agent
shall do any one or more of the following:
(a) Acceleration. Declare all outstanding principal of
and accrued and unpaid interest on the Loans and all other amounts
payable by any Loan Party under the Loan Documents immediately due and
payable, and the same shall thereupon become immediately due and
payable, without notice, demand, presentment, notice of dishonor,
notice of acceleration, notice of intent to accelerate, protest or
other formalities of any kind, all of which are hereby expressly
waived by the Loan Parties;
(b) Termination of Commitments. Terminate the
Commitments (including, without limitation, any obligation of the
Issuing Bank to issue Letters of Credit) without notice to the
Borrowers or any other Loan Party;
(c) Judgment. Reduce any claim to judgment;
(d) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Agent for the benefit of the Agent and the Lenders to
secure payment and performance of the Obligations in accordance with
the terms of the Loan Documents; or
(e) Rights. Exercise any and all rights and remedies
afforded by the laws of the State of Texas, Canada or any other
jurisdiction, by any of the Loan Documents, by equity or otherwise;
provided, however, that upon (i) the occurrence of an Event of Default under
Section 11.1(e) or Section 11.1(f), the Commitments of all of the Lenders
(including, without limitation, any obligation of the Issuing Bank to issue
Letters of Credit) shall immediately and automatically terminate, and the
outstanding principal of and accrued and unpaid interest on the Loans and all
other amounts payable by the Loan Parties under the Loan Documents shall
thereupon become immediately and automatically due and payable, and (ii) upon
the occurrence of an Event of Default under clause (iv) of Section 11.1(m) or
under Section 11.1(n), the outstanding principal of and accrued and unpaid
interest on the Loans and all other amounts payable by the Loan Parties under
the Loan Documents shall thereupon become immediately and automatically due and
payable, all (with respect to each of clause (i) and (ii) preceding) without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, protest or other formalities of any kind, all of which
are hereby expressly waived by the Loan Parties.
Section 11.3 Performance by the Agent. If any Loan Party shall
fail to perform any covenant or agreement in accordance with the terms of the
Loan Documents, the Agent may, at the direction of the Required Lenders,
perform or attempt to perform such covenant or agreement on behalf of such Loan
Party. In such event, the Borrower shall, at the request of the Agent,
promptly pay any amount expended by the Agent or the Lenders in connection with
such performance or attempted performance to the Agent at the Principal Office,
together with interest thereon at the applicable Default Rate from and
including the date of such expenditure to but excluding the date such
expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that neither the Agent nor any Lender shall have any liability or
responsibility for the
78
<PAGE> 85
performance of any obligation of the Borrower or any other Loan Party under
this Agreement or any of the other Loan Documents.
Section 11.4 Judgment Currency. If, for the purpose of obtaining
judgment in any court in any jurisdiction with respect to this Agreement or any
other Loan Document or the Collateral, it becomes necessary to convert into the
currency of such jurisdiction (herein called the "Judgment Currency") any
amount due hereunder in any currency other than the Judgment Currency, then
conversion shall be made at the rate of exchange prevailing on the Business Day
before the day on which judgment is given. For this purpose, "rate of
exchange" means the rate at which the Agent is able, on the relevant date, to
sell the currency of the amount due hereunder in Toronto, Ontario against the
Judgment Currency. In the event that there is a change in the rate of exchange
prevailing between the Business Day before the day on which the judgment is
given and the date of payment of the amount due, the Borrower agrees that it
will, on the date of payment, pay such additional amounts (if any) as may be
necessary to ensure that the amount paid on such date is the amount in the
Judgment Currency which, when converted at the rate of exchange prevailing on
the date of payment, is the amount then due under this Agreement in Cdn.
Dollars or Dollars, as the case may be. Any additional amount due under this
Section 11.4 will be due as a separate indebtedness and shall not be affected
by judgment being obtained for any other sums due under or in respect of this
Agreement or any other Loan Document.
Section 11.5 Cash Collateral. If an Event of Default shall have
occurred and be continuing, the Borrower shall, if requested by the Agent or
the Required Lenders, pledge to the Agent as security for the Obligations an
amount in immediately available funds equal to the then outstanding Letter of
Credit Liabilities, such funds to be held in a cash collateral account
satisfactory to the Agent without any right of withdrawal by the Borrower.
ARTICLE 12
The Agent
Section 12.1 Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Neither the Agent nor any of its Affiliates, officers,
directors, employees, attorneys or agents shall be liable for any action taken
or omitted to be taken by any of them hereunder or otherwise in connection with
this Agreement or any of the other Loan Documents except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (a) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent, (b) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender,
(c) shall not be required to initiate any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
the Required Lenders, (d) shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement
or any other Loan Document, or any certificate or other document
79
<PAGE> 86
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, enforceability or sufficiency of this Agreement or any other
Loan Document or any other document referred to or provided for herein or
therein or for any failure by any Person to perform any of its obligations
hereunder or thereunder, (e) may consult with legal counsel (including counsel
for any Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts, and (f) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate or other instrument or
writing reasonably believed by it to be genuine and signed or sent by the
proper party or parties. As to any matters not expressly provided for by this
Agreement, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by the
Required Lenders, and such instructions of the Required Lenders and any action
taken or failure to act pursuant thereto shall be binding on all of the
Lenders; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to liability or which is contrary to this
Agreement or any other Loan Document or applicable law.
Section 12.2 Rights of Agent as a Lender. With respect to its
Commitment, the Loans made by it and the Note issued to it, NationsBank (and
any successor acting as Agent) in its capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent
in-its individual capacity. The Agent and its Affiliates may (without having
to account therefor to any Lender) accept deposits from, lend money to, act as
trustee under indentures of, provide merchant banking services to, own
securities of, and generally engage in any kind of banking, trust or other
business with, the Loan Parties or any of their Affiliates and any other Person
who may do business with or own securities of the Loan Parties or any of their
Affiliates, all as if it were not acting as the Agent and without any duty to
account therefor to the Lenders.
Section 12.3 Defaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default (other than the non-payment
of principal of or interest on the Loans or of commitment fees) unless the
Agent has received notice from a Lender or the Borrower specifying such Default
and stating that such notice is a "notice of default". In the event that the
Agent receives such a notice of the occurrence of a Default, the Agent shall
give prompt notice thereof to the Lenders (and shall give each Lender prompt
notice of each such non-payment). The Agent shall (subject to Section 12.1)
take such action with respect to such Default as shall be directed by the
Required Lenders, provided that unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default as it
shall seem advisable and in the best interest of the Lenders.
SECTION 12.4 INDEMNIFICATION. EACH LENDER HEREBY AGREES TO
INDEMNIFY THE AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT
REIMBURSED UNDER SECTIONS 13.1 AND 13.2, BUT WITHOUT LIMITING THE OBLIGATIONS
OF THE LOAN PARTIES UNDER SECTIONS 13.1 AND 13.2), RATABLY IN ACCORDANCE WITH
ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF ITS COMMITMENT PERCENTAGE), ANY
80
<PAGE> 87
AND ALL LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES),
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES,
SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY
KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED
AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY THE AGENT UNDER OR IN
RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED, FURTHER, THAT NO LENDER SHALL
BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING,
IT IS THE EXPRESS INTENTION OF THE LENDERS THAT THE AGENT SHALL BE INDEMNIFIED
HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES (INCLUDING,
WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE
AGENT (EXCEPT TO THE EXTENT THE SAME ARE CAUSED BY THE AGENT'S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT). WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION
12.4, EACH LENDER AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS
PRO RATA SHARE (CALCULATED ON THE BASIS OF ITS COMMITMENT PERCENTAGE) OF ANY
AND ALL OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS' FEES) INCURRED BY THE
AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR
RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT THAT THE AGENT IS NOT
PROMPTLY REIMBURSED FOR SUCH EXPENSES BY THE BORROWERS.
Section 12.5 Independent Credit Decisions. Each Lender agrees
that it has independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower and its Subsidiaries
and the other Loan Parties and its own decision to enter into this Agreement
and that it will, independently and without reliance upon the Agent or any
other Lender, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be required to keep itself informed as to the
performance or observance by any Loan Party of this Agreement or any other Loan
Document or to inspect the Properties or books of any Loan Party. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder or under the other Loan
Documents, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other financial information concerning the affairs,
financial condition or business of any Loan Party (or any of their Affiliates)
which may come into the possession of the Agent or any of its Affiliates.
81
<PAGE> 88
Section 12.6 Several Commitments. The Commitments and other
obligations of the Lenders under this Agreement are several. The default by
any Lender in making a Loan in accordance with its Commitment shall not relieve
the other Lenders of their obligations under this Agreement. In the event of
any default by any Lender in making any Loan, each nondefaulting Lender shall
be obligated to make its Loan but shall not be obligated to advance the amount
which the defaulting Lender was required to advance hereunder. In no event
shall any Lender be required to advance an amount or amounts with respect to
any of the Loans which would in the aggregate exceed such Lender's Commitment
with respect to such Loans. No Lender shall be responsible for any act or
omission of any other Lender.
Section 12.7 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders will have the right to appoint another Lender
as a successor Agent. If no successor Agent shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be
a commercial bank organized under the laws of the U.S. or any state thereof or
of a foreign country if acting through its U.S. branch and having combined
capital and surplus of at least $100,000,000. Upon the acceptance of its
appointment as successor Agent, such successor Agent shall thereupon succeed to
and become vested with all rights, powers, privileges, immunities and duties of
the resigning Agent, and the resigning Agent shall be discharged from its
duties and obligations under this Agreement and the other Loan Documents.
After any Agent's resignation as Agent, the provisions of this Article 12 shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was the Agent. Each Agent (including each successor
Agent) agrees that, so long as it is acting as Agent under this Agreement, it
shall be a Lender under this Agreement.
ARTICLE 13
Miscellaneous
Section 13.1 Expenses. Whether or not the transactions
contemplated hereby are consummated, the Borrower hereby agrees, on demand, to
pay or reimburse the Agent and each of the Lenders for paying: (a) all
reasonable out-of- pocket costs and expenses of the Agent accrued in connection
with the preparation, negotiation, execution and delivery of this Agreement and
the other Loan Documents, and any and all waivers, amendments, modifications,
renewals, extensions and supplements thereof and thereto, and the syndication
of the Commitments and the Loans, including, without limitation, the reasonable
fees and expenses of legal counsel for the Agent, (b) all out-of-pocket costs
and expenses of the Agent and the Lenders in connection with any Default, the
exercise of any right or remedy and the enforcement of this Agreement or any
other Loan Document or any term or provision hereof or thereof, including,
without limitation, the fees and expenses of all legal counsel for the Agent
and/or any Lender (unless, with respect to legal counsel of any Lender other
than NationsBank, the Agent has not approved of the payment by the Borrower of
the fees and expenses of such counsel), (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any Governmental
Authority in respect of this Agreement or any of the other Loan Documents, (d)
all costs, expenses, assessments and other charges incurred in connection with
any filing, registration, recording or
82
<PAGE> 89
perfection of any Lien contemplated by this Agreement or any other Loan
Document, and (e) all reasonable out-of-pocket costs and expenses incurred by
the Agent in connection with due diligence, computer services, copying,
appraisals, environmental audits, collateral audits, field exams, insurance,
consultants and search reports.
SECTION 13.2 INDEMNIFICATION. EACH OF THE LOAN PARTIES HEREBY
JOINTLY AND SEVERALLY AGREES TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH
AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES),
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES
(INCLUDING REASONABLE ATTORNEYS' AND CONSULTANTS' FEES) TO WHICH ANY OF THEM
MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR ENFORCEMENT OF
ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN
DOCUMENTS, (C) THE RELATED TRANSACTIONS, (D) ANY BREACH BY ANY LOAN PARTY OF
ANY REPRESENTATION, WARRANTY, COVENANT OR OTHER AGREEMENT CONTAINED IN ANY OF
THE LOAN DOCUMENTS, (E) THE USE OR PROPOSED USE OF ANY LOAN OR LETTER OF
CREDIT, (F) ANY AND ALL TAXES, LEVEES, DEDUCTIONS AND CHARGES IMPOSED ON THE
AGENT, THE ISSUING BANK OR ANY LENDER IN RESPECT OF ANY LOAN OR LETTER OF
CREDIT, (G) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL OR
CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF
THE PROPERTIES OF ANY LOAN PARTY, EXCEPT TO THE EXTENT THAT THE LOSS, DAMAGE OR
CLAIM IS THE DIRECT RESULT OF AN INTENTIONAL AND AFFIRMATIVE ACT BY THE PERSON
TO BE INDEMNIFIED THAT CONSTITUTES GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH PERSON, OR (H) ANY INVESTIGATION, LITIGATION OR OTHER PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION OR
OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING; BUT EXCLUDING ANY OF THE
FOREGOING TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
THE PERSON TO BE INDEMNIFIED. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT
OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES
HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION 13.2 SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES
(INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF SUCH PERSON. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER TERM
OR PROVISION OF THIS AGREEMENT, THE OBLIGATIONS OF THE LOAN PARTIES UNDER THIS
SECTION 13.2 SHALL SURVIVE THE REPAYMENT OF THE LOANS AND OTHER OBLIGATIONS AND
TERMINATION OF THE COMMITMENTS.
83
<PAGE> 90
Section 13.3 Limitation of Liability. None of the Agent, any
Lender or any Affiliate, officer, director, employee, attorney or agent thereof
shall be liable for any error of judgment or act done in good faith, or be
otherwise liable or responsible under any circumstances whatsoever (including
such Person's negligence), except for such Person's gross negligence or willful
misconduct. None of the Agent, any Lender or any Affiliate, officer, director,
employee, attorney or agent thereof shall have any liability with respect to,
and each of the Loan Parties hereby waives, releases and agrees not to sue any
of them upon, any claim for any special, indirect, incidental or consequential
damages suffered or incurred by the Borrower or any other Loan Party in
connection with, arising out of or in any way related to this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. Each of the Loan Parties hereby
waives, releases and agrees not to sue the Agent or any Lender or any of their
respective Affiliates, officers, directors, employees, attorneys or agents for
exemplary or punitive damages in respect of any claim in connection with,
arising out of or in any way related to this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or any of
the other Loan Documents.
Section 13.4 No Duty. All attorneys, accountants, appraisers and
other professional Persons and consultants retained by the Agent and the
Lenders shall have the right to act exclusively in the interest of the Agent
and the Lenders and shall have no duty of disclosure, duty of loyalty, duty of
care or other duty or obligation of any type or nature whatsoever to the
Borrower or any of its Subsidiaries or any of their shareholders or any other
Person.
Section 13.5 No Fiduciary Relationship. The relationship between
each Loan Party and each Lender is solely that of debtor and creditor, and
neither the Agent nor any Lender has any fiduciary or other special
relationship with the Borrower or any other Loan Party, and no term or
condition of any of the Loan Documents shall be construed so as to deem the
relationship between the Borrower and any Lender, or any other Loan Party and
any Lender, to be other than that of debtor and creditor. No joint venture or
partnership is created by this Agreement among the Lenders or among the
Borrower or any other Loan Party and the Lenders.
Section 13.6 Equitable Relief. Each of the Loan Parties
recognizes that, in the event it fails to pay, perform, observe or discharge
any or all of the Obligations, any remedy at law may prove to be inadequate
relief to the Agent and the Lenders. Each of the Loan Parties therefore agrees
that the Agent and the Lenders, if the Agent or the Lenders so request, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
Section 13.7 No Waiver; Cumulative Remedies. No failure on the
part of the Agent or any Lender to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under
this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided for in this Agreement and the other Loan Documents
are cumulative and not exclusive of any rights and remedies provided by law.
Section 13.8 Successors and Assigns.
84
<PAGE> 91
(a) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Neither the
Borrower nor any other Loan Party may assign or transfer any of its rights or
obligations under this Agreement or any other Loan Document without the prior
written consent of the Agent and the Lenders. Any Lender may sell
participations in all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitment and the Loans owing to it); provided, however, that
(i) such Lender's obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment) shall remain unchanged, (ii)
such Lender shall remain solely responsible to the Borrower for the performance
of such obligations, (iii) such Lender shall remain the holder of its Note for
all purposes of this Agreement, and (iv) the Loan Parties shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents.
(b) Each of the Loan Parties and each of the Lenders agree that
any Lender (the "Assigning Lender") may at any time assign to one or more
Eligible Assignees all, or a proportionate part of all, of its rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, its Commitment and Loans) (each an "Assignee"); provided,
however, that (i) each such assignment may be of a varying percentage of the
Assigning Lender's rights and obligations under this Agreement and the other
Loan Documents and may relate to some but not all of such rights and/or
obligations, (ii) except in the case of an assignment of all of a Lender's
rights and obligations under this Agreement and the other Loan Documents, the
amount of the Commitment and Loans of the Assigning Lender being assigned
pursuant to each assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be less than the
lesser of (A) an amount equal to $1,000,000 calculated based upon the
Commitment assigned (or, if such Commitment has terminated or expired, the
aggregate outstanding principal amount of the Loans and the Letter of Credit
Liabilities assigned), or (B) an amount equal to five percent of the aggregate
Commitments (or, if such Commitments have terminated or expired, the aggregate
outstanding principal amount of the Loans and the Letter of Credit
Liabilities), and (iii) the parties to each such assignment shall execute and
deliver to the Agent for its acceptance and recording in the Register (as
defined below), an Assignment and Acceptance, together with the Note subject to
such assignment, and a processing and recordation fee of $2,500. Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least five Business Days after the execution thereof or such other date as
may be approved by the Agent, (1) the Assignee thereunder shall be a party
hereto as a "Lender" and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and under the Loan Documents, and
(2) the Assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement and the other Loan Documents (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of a Lender's rights and
obligations under the Loan Documents, such Lender shall cease to be a party
thereto, provided that such Lender's rights under Article 4, Section 13.1 and
Section 13.2 accrued through the date of assignment shall continue).
85
<PAGE> 92
(c) By executing and delivering an Assignment and Acceptance, the
Assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such Assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any other instrument
or document furnished pursuant thereto; (ii) such Assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition or results of operations of any Loan Party or the
performance or observance by any Loan Party of its obligations under the Loan
Documents; (iii) such Assignee confirms that it has received a copy of the
other Loan Documents, together with copies of the financial statements referred
to in Section 7.2 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such Assignee will, independently and without
reliance upon the Agent or such Assigning Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and
the other Loan Documents; (v) such Assignee confirms that it is an Eligible
Assignee; (vi) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and exercise such powers under the Loan Documents
as are delegated to the Agent by the terms thereof, together with such powers
as are reasonably incidental thereto; and (vii) such Assignee agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender.
(d) The Agent shall maintain at its Principal Office a copy of
each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Loan Parties, the
Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes under the Loan Documents. The
Register shall be available for inspection by any Loan Party or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an Assigning Lender and Assignee representing that it is an Eligible Assignee,
together with the Note subject to such assignment, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the form
of Exhibit A hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, and (iii) give prompt written
notice thereof to the Borrower. Within five Business Days after its receipt of
such notice, the Borrower, at its expense, shall execute and deliver to the
Agent in exchange for each surrendered Note evidencing the Loans, a new Note
evidencing such Loans payable to the order of such Eligible Assignee in an
amount equal to such Loans assigned to it and, if the Assigning Lender has
retained any Loans, a new Note evidencing each such Loans payable to the order
of the Assigning Lender in the amount of such Loans retained by it (each such
promissory note shall constitute a "Note" for purposes of the Loan Documents).
Such new Notes shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit B
hereto.
86
<PAGE> 93
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
13.8, disclose to the Assignee or participant or proposed Assignee or
participant any information relating to the Borrower or any of its Subsidiaries
or any other Loan Party furnished to such Lender by or on behalf of the
Borrower or any of its Subsidiaries or any other Loan Party; provided that each
such actual or proposed Assignee or participant shall agree to be bound by the
provisions of Section 13.20.
(g) Any Lender may assign and pledge the Note held by it to any
Federal Reserve Bank or the U.S. Treasury as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
operating circular issued by such Federal Reserve System and/or Federal Reserve
Bank; provided, however, that any payment made by the Borrower for the benefit
of such assigning and/or pledging Lender in accordance with the terms of the
Loan Documents shall satisfy the Borrower's obligations under the Loan
Documents in respect thereof to the extent of such payment. No such assignment
and/or pledge shall release the assigning and/or pledging Lender from its
obligations hereunder.
Section 13.9 Survival. All representations and warranties made or
deemed made in this Agreement or any other Loan Document or in any document,
statement or certificate furnished in connection with this Agreement shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making of the Loans, and no investigation by the Agent or any
Lender or any closing shall affect the representations and warranties or the
right of the Agent or any Lender to rely upon them. Without prejudice to the
survival of any other obligation of any Loan Party hereunder, the obligations
of such Loan Party under Article 4 and Sections 13.1 and 13.2 shall survive
repayment of the Loans and the Reimbursement Obligations and the other
Obligations.
SECTION 13.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, TERM
SHEETS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
Section 13.11 Amendments. No amendment or waiver of any provision
of this Agreement, the Notes or any other Loan Document to which any Loan Party
is a party, nor any consent to any departure by such Loan Party therefrom,
shall in any event be effective unless the same shall be agreed or consented to
by the Required Lenders and the applicable Loan Party or Loan Parties in
writing, and each such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all of the Lenders and the applicable Loan Party or Loan Parties, do
any of the following: (a) increase the Commitments of the Lenders or subject
the Lenders to any additional obligations; (b) reduce the principal of, or
interest on, the Loans or any fees or other amounts payable hereunder; (c)
postpone any date
87
<PAGE> 94
fixed for any payment (including, without limitation, any mandatory prepayment)
of principal of, or interest on, the Loans or any fees or other amounts payable
hereunder; (d) waive any of the conditions precedent specified in Article 6;
(e) change the Commitment Percentages or the aggregate unpaid principal amount
of the Loans or the number or interests of the Lenders which shall be required
for the Lenders or any of them to take any action under this Agreement; (f)
change any provision contained in Section 3.2, Section 9.13 or this Section
13.11 or modify the definition of "Required Lenders" contained in Section 1.1;
or (g) except as expressly authorized by this Agreement, release any Collateral
from any of the Liens created by the Security Documents or release any guaranty
of all or any portion of the Obligations; and provided further, however, that
no amendment, waiver or consent relating to Sections 12.1, 12.2, 12.3, 12.4 or
12.5 shall require the agreement of any Loan Party. Notwithstanding anything
to the contrary contained in this Section 13.11, no amendment, waiver or
consent shall be made with respect to Article 12 hereof without the prior
written consent of the Agent.
Section 13.12 Maximum Interest Rate.
(a) No interest rate specified in this Agreement or any other Loan
Document shall at any time exceed the Maximum Rate. If at any time the
interest rate (the "Contract Rate") for any Obligation shall exceed the Maximum
Rate, thereby causing the interest accruing on such Obligation to be limited to
the Maximum Rate, then any subsequent reduction in the Contract Rate for such
Obligation shall not reduce the rate of interest on such Obligation below the
Maximum Rate until the aggregate amount of interest accrued on such Obligation
equals the aggregate amount of interest which would have accrued on such
Obligation if the Contract Rate for such Obligation had at all times been in
effect.
(b) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, none of the terms and provisions of this
Agreement or the other Loan Documents shall ever be construed to create a
contract or obligation to pay interest at a rate in excess of the Maximum Rate;
and neither the Agent nor any Lender shall ever charge, receive, take, collect,
reserve or apply, as interest on the Obligations, any amount in excess of the
Maximum Rate. The parties hereto agree that any interest, charge, fee, expense
or other obligation provided for in this Agreement or in the other Loan
Documents which constitutes interest under applicable law shall be, ipso facto
and under any and all circumstances, limited or reduced to an amount equal to
the lesser of (i) the amount of such interest, charge, fee, expense or other
obligation that would be payable in the absence of this Section 13.12(b) or
(ii) an amount, which when added to all other interest payable under this
Agreement and the other Loan Documents, equals the Maximum Rate. If,
notwithstanding the foregoing, the Agent or any Lender ever contracts for,
charges, receives, takes, collects, reserves or applies as interest any amount
in excess of the Maximum Rate, such amount which would be deemed excessive
interest shall be deemed a partial payment or prepayment of principal of the
Obligations and treated hereunder as such; and if the Obligations, or
applicable portions thereof, are paid in full, any remaining excess shall
promptly be paid to the applicable Loan Party or Loan Parties (as appropriate).
In determining whether the interest paid or payable, under any specific
contingency, exceeds the Maximum Rate, the Loan Parties, the Agent and the
Lenders shall, to the maximum extent permitted by applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate and spread in equal or unequal parts the
total amount of interest
88
<PAGE> 95
throughout the entire contemplated term of the Obligations, or applicable
portions thereof, so that the interest rate does not exceed the Maximum Rate at
any time during the term of the Obligations; provided that, if the unpaid
principal balance is paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period
of existence thereof exceeds the Maximum Rate, the Agent and/or the Lenders, as
appropriate, shall refund to the applicable Loan Party or Loan Parties (as
appropriate) the amount of such excess and, in such event, the Agent and the
Lenders shall not be subject to any penalties provided by any laws for
contracting for, charging, receiving, taking, collecting, reserving or applying
interest in excess of the Maximum Rate. In addition to the foregoing, each of
the Loan Parties agrees that no provision of this Agreement or any other Loan
Document shall have the effect of imposing on any Loan Party any obligation to
pay interest (as such term is defined in Section 347 of the Criminal Code of
Canada) at a rate in excess of the rate permitted by the laws of Canada if and
to the extent (if any) that such laws are applicable, after taking into account
all other amounts which must be taken into account for the purpose of such
laws, and the obligations of the Loan Parties to pay interest under this
Agreement and the other Loan Documents is so limited.
(c) Pursuant to Article 15.10(b) of Chapter 15, Subtitle 79,
Revised Civil Statutes of Texas 1925, as amended, each of the Loan Parties
agrees that such Chapter 15 (which regulates certain revolving credit loan
accounts and revolving tri-party accounts) shall not govern or in any manner
apply to the Obligations.
Section 13.13 Notices. All notices and other communications
provided for in this Agreement and the other Loan Documents to which the
Borrower or any of its Subsidiaries is a party shall be given or made by
telecopy or in writing and telecopied, mailed by certified mail return receipt
requested or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof (or, with respect to a
Lender that becomes a party to this Agreement pursuant to an assignment made in
accordance with Section 13.8, in the Assignment and Acceptance executed by it);
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party given in accordance with this Section 13.13.
Except as otherwise provided in this Agreement, all such communications shall
be deemed to have been duly given when transmitted by telecopy or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid; provided, however, that notices to the Agent shall
be deemed given when received by the Agent.
SECTION 13.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS. EXCEPT AS MAY BE EXPRESSLY STATED TO THE CONTRARY IN CERTAIN LOAN
DOCUMENTS, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS
(WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE
U.S. EACH OF THE BORROWER AND EACH OF ITS SUBSIDIARIES HEREBY SUBMITS TO THE
NON- EXCLUSIVE JURISDICTION OF EACH OF (1) THE U.S. DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS, AND (2) ANY TEXAS STATE COURT SITTING IN DALLAS
COUNTY, TEXAS, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
89
<PAGE> 96
CONTEMPLATED HEREBY OR THEREBY. EACH OF THE BORROWER AND EACH OF ITS
SUBSIDIARIES HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO
SUCH PERSON AT ITS ADDRESS SET FORTH UNDERNEATH ITS SIGNATURE HERETO. EACH OF
THE BORROWER AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORM.
Section 13.15 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 13.16 Severability. Any provision of this Agreement held
by a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 13.17 Headings. The headings, captions and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 13.18 Construction. Each of the Borrower and each of its
Subsidiaries, the Agent and each Lender acknowledges that it has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Loan Documents with its legal counsel
and that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by the parties hereto.
Section 13.19 Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default if such action is taken or such
condition exists.
Section 13.20 Confidentiality. Each Lender agrees to exercise its
best efforts to keep any information delivered or made available by any Loan
Party to it which is clearly indicated to be confidential information,
confidential from anyone other than Persons employed or retained by such Lender
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Loans; provided that nothing herein shall prevent any
Lender from disclosing such information (a) to any other Lender, (b) to any
Person if reasonably incidental to the administration of the Loans, (c) upon
the order of any court or administrative agency, (d) upon the request or demand
of any regulatory agency or authority having jurisdiction over such Lender, (e)
which has been publicly disclosed, (f) in connection with any litigation to
which the Agent, any Lender or their respective Affiliates may be a party, (g)
to the extent reasonably required in connection with the exercise of any right
or remedy under the Loan Documents, (h) to such
90
<PAGE> 97
Lender's legal counsel, independent auditors and affiliates, and (i) to any
actual or proposed participant or Assignee of all or part of its rights
hereunder, so long as such actual or proposed participant or Assignee agrees to
be bound by the provisions of this Section 13.20.
SECTION 13.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY
OR THE ACTIONS OF ANY LOAN PARTY, THE AGENT OR ANY LENDER IN THE NEGOTIATION,
ADMINISTRATION OR ENFORCEMENT THEREOF.
Section 13.22 Approvals and Consent. Except as may be expressly
provided to the contrary in this Agreement or in the other Loan Documents (as
applicable), in any instance under this Agreement of the other Loan Documents
where the approval, consent or exercise of judgment of the Agent or any Lender
is requested or required, (a) the granting or denial of such approval or
consent and the exercise of such judgment shall be within the sole discretion
of the Agent or such Lender, respectively, and the Agent and such Lender shall
not, for any reason or to any extent, be required to grant such approval or
consent or to exercise such judgment in any particular manner, regardless of
the reasonableness of the request or the action or judgment of the Agent or
such Lender, and (b) no approval or consent of the Agent or any Lender shall in
any event be effective unless the same shall be in writing and the same shall
be effective only in the specific instance and for the specific purpose for
which given.
Section 13.23 Agent for Services of Process. Each of the
Subsidiaries of the Borrower hereby irrevocably designates the Borrower, whose
address is One Galleria Tower, 13355 Noel Road, Suite 1650, Dallas, Texas
75240, to receive, for and on behalf of such Person, service of process in the
State of Texas, such service being hereby acknowledged by such Person to be
effective and binding service in every respect. In the event that the Borrower
resigns or ceases to serve as such Person's agent for service of process
hereunder, such Person agrees forthwith (a) to designate another agent for
service of process in Texas, and (b) to give prompt written notice to the Agent
of the name and address of such agent. Each of the Subsidiaries of the
Borrower agrees that the failure of its agent for service of process to give
any notice of any such service of process to such Person shall not impair or
affect the validity of such service or of any judgment based thereon. If,
despite the foregoing, there is for any reason no agent for service of process
of such Person available to be served, then such Person further irrevocably
consents to the service of process by the mailing thereof by the Agent or the
Required Lenders by registered or certified mail, postage prepaid, to such
Person at its address listed on the signature pages hereof. Nothing in this
Section 13.23 shall affect the right of the Agent or the Lenders to serve legal
process in any other manner permitted by law or affect the right of the Agent
or any Lender to bring any action or proceeding against the Borrower or any of
its Subsidiaries or its Property in the court of any jurisdiction.
Section 13.24 Joint and Several Obligations. Each and every
representation, warranty, covenant or agreement of the Loan Parties or any two
or more Loan Parties or of the Borrower and its Subsidiaries contained herein
shall be, and shall be deemed to be, the joint and several
91
<PAGE> 98
representation, warranty, covenant and agreement of each of the Loan Parties or
such Loan Parties or of the Borrower and each of its Subsidiaries,
respectively, and of all such Persons.
Section 13.25 Supplements to Certain Schedules. Schedules 1.1(a),
7.4, 7.6, 7.7(a), 7.7(b), 7.10, 7.11, 7.13, 7.15, 7.22, 7.23, 7.25, 7.27, 7.28
and 9.5 hereto may be supplemented by the Borrower prior to or concurrently
with the Funding Date; provided, however, that each such supplement is subject
to the approval of the Agent (consistent with Section 6.1(ee)). Each such
supplement proposed by the Borrower and approved by the Agent shall be deemed
to be a part of the Schedule to which such supplement relates.
Section 13.26 Amendment and Restatement of Existing Agreement.
Effective as of the Funding Date and upon payment of the Existing Loans and all
other Obligations (as defined in the Existing Agreement) in full and
termination of all Commitments (as defined in the Existing Agreement), this
Agreement shall constitute an amendment and restatement of the Existing
Agreement; provided, however, that the Existing Agreement shall remain in full
force and effect unless and until such amendment and restatement occurs.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written or, with respect to each
of the New Loan Parties (other than Action Delivery, KHB and Zipper if such
corporation has been wound-up with and into Parcelway Canada on or before the
Funding Date), as of the Funding Date.
DYNAMEX INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President - Finance
and Corporate Development
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
PARCELWAY COURIER SYSTEMS
CANADA LTD.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
92
<PAGE> 99
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
PARCELWAY COURIER SYSTEMS
(B.C.) LTD.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
DYNAMEX OPERATIONS EAST, INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
93
<PAGE> 100
DYNAMEX OPERATIONS WEST, INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
ACTION DELIVERY AND MESSENGER
SERVICE (1996) LIMITED (1)
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
SEIDEL ENTERPRISES, INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
- ----------------------------------
(1) This Agreement is to be executed by such corporation if such corporation
has not been wound-up with and into Parcelway Canada on or before the
Funding Date.
94
<PAGE> 101
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
NOW COURIER, INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
SEKO ENTERPRISES, INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
YS CORPORATION
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
95
<PAGE> 102
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
ATTENTION MESSENGER SERVICE
OF ILLINOIS, INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
SOUTHBANK COURIER INC.
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
96
<PAGE> 103
K.H.B. & ASSOCIATES LTD.1
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
ZIPPER TRANSPORTATION SERVICES LTD.1
By:
-------------------------------------
Name: Robert P. Capps
Title: Vice President
Address for Notices:
One Galleria Tower, Suite 1650
13355 Noel Road
Dallas, Texas 75240
Telecopy No.: (214) 960-4833
Telephone No.: (214) 960-4848
Attention: Chief Financial Officer
- ----------------------------------
(1) This Agreement is to be executed by such corporation if such corporation
has not been wound-up with and into Parcelway Canada on or before the
Funding Date.
97
<PAGE> 104
AGENT:
NATIONSBANK OF TEXAS, N.A., as Agent
By:
-------------------------------------
Name: Russell P. Hartsfield
Title: Senior Vice President
Address for Notices:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Telecopy No.: (214) 508-3139
Telephone No.: (214) 508-0339
Attention: Russell P. Hartsfield
Senior Vice President
LENDERS:
NATIONSBANK OF TEXAS, N.A.
Commitment: $40,000,000 By:
-------------------------------------
Name: Russell P. Hartsfield
Title: Senior Vice President
Address for Notices:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Telecopy No.: (214) 508-3139
Telephone No.: (214) 508-0339
Attention: Russell P. Hartsfield
Senior Vice President
Lending Office for Prime Rate Loans:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attention: Dallas Commercial Banking
98
<PAGE> 105
Lending Office for Eurodollar Loans:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attention: Dallas Commercial Banking
99
<PAGE> 1
EXHIBIT 23.1
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement, relating to the
issue of 3,100,000 shares of Common Stock of Dynamex Inc. on Form S-1 of our
reports dated (i) May 30, 1996, except for Note 13, as to which the date is June
3, 1996 on the consolidated financial statements of Dynamex Inc. and
subsidiaries; (ii) September 15, 1995 on the statements of operations and
changes in financial position of Dynamex Express Inc.; (iii) March 8, 1996 on
the consolidated financial statements of K. H. B. & Associates Ltd.; (iv) May
22, 1996 on the consolidated financial statements of Southbank Courier, Inc.;
(v) March 29, 1996 on the consolidated financial statements of Action Delivery
and Messenger Service Limited; and (vi) April 5, 1996 on the combined financial
statements of Seko Enterprises, Inc. and Related Companies.
We also consent to the reference to our firm under the caption
"Experts" in such Prospectus.
DELOITTE & TOUCHE
Toronto, Ontario
July 9, 1996
<PAGE> 1
EXHIBIT 23.2
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Dynamex, Inc.
on Form S-1 of our report dated April 19, 1996 on the combined statements of
operations and cash flows of Mayne Nickless Courier (a wholly owned business of
Mayne Nickless Transport, North America until December 28, 1995) for the six
months ended December 28, 1995 and each of the three fiscal years in the
period ended July 2, 1995 (which report expresses an unqualified opinion on
such financial statements and includes an explanatory paragraph referring to
Mayne Nickless Courier's basis of presentation) and our report dated March 22,
1996 on the combined financial statements of Seidel Delivery (which include
accounts of Seidel Enterprises, Inc. and NOW Courier, Inc.) for the years ended
December 31, 1994 and 1995, appearing in this Prospectus, which is a part of
such Registration Statement.
We also consent to the references to us under the heading "Experts"
in such Prospectus.
DELOITTE & TOUCHE LLP
July 9, 1996
<PAGE> 1
EXHIBIT 23.3
[PRICE WATERHOUSE LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Dynamex Inc. on Form S-1
of our report dated February 24, 1995 on our audits of the statements of
operations and changes in financial position of Dynamex Express Inc. for each of
the three years in the period ended December 31, 1994. We also consent to the
reference to our firm under the caption "Experts".
/s/ PRICE WATERHOUSE
Chartered Accountants
Mississauga, Ontario
July 9, 1996
