<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 30, 1997
DYNAMEX INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-21057 86-0712225
(State or Other Jurisdiction of (Commission File Number) (IRS employment
Incorporation or Organization) identification no.)
1431 Greenway Drive
Suite 345
Irving, Texas 75038
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 756-8180
Page 1 of __ pages
Exhibit index on page 2
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 30, 1997 the Company acquired the stock of City Courier,
Inc., New York Document Exchange Corporation and Eastside/Westside, Inc.
(collectively, the "New York Companies"). The New York Companies are engaged in
the same-day transportation and facilities management business, in the
metropolitan New York City area. The stockholders of the New York Companies
received $12.1 million in cash in the transaction. In addition, the Company
assumed obligations amounting to $2.5 million. The consideration was determined
in arms-length negotiations between the Company and the stockholders of the New
York Companies. The transaction is being accounted for using the purchase
method of accounting.
The cash portion of the purchase price was obtained by the Company
pursuant to its revolving credit agreement with NationsBank.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Combined financial statements of the New York Companies for the year ended
May 31, 1997 are included herein.
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial statements of the Company reflecting the acquisition
of the New York Companies are not currently available but will be filed not
later than 60 days from the date on which this report on Form 8-K was required
to be filed.
(c) EXHIBITS.
2.1 Stock Purchase Agreement dated September 30, 1997 by and among Dynamex Inc.
and the Shareholders of City Courier, Inc., New York Document Exchange
Corporation and Eastside/Westside, Inc.
2
<PAGE> 3
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DYNAMEX INC.
Date: October 7, 1997 By: /s/ Robert P. Capps
----------------------------
Robert P. Capps
Vice President,
Chief Financial Officer
3
<PAGE> 4
Combined Financial Statements of
NEW YORK DOCUMENT EXCHANGE
CORPORATION, EASTSIDE-WESTSIDE,
INC., AND CITY COURIER, INC.
May 31, 1997
<PAGE> 5
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
New York Document Exchange Corporation,
Eastside-Westside, Inc., and City Courier, Inc.
We have audited the accompanying combined balance sheet of New York Document
Exchange Corporation, Eastside-Westside, Inc., and City Courier, Inc. (the
"Companies"), all of which are under common ownership and common management, as
of May 31, 1997 and the related combined statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined financial position of the Companies' at May 31,
1997 and the combined results of their operations and their combined cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE
Chartered Accountants
Toronto, Ontario
August 1, 1997
<PAGE> 6
TABLE OF CONTENTS
Page
----
Combined Balance Sheet 1
Combined Statement of Operations 2
Combined Statement of Stockholders' Equity 3
Combined Statement of Cash Flows 4
Notes to the Combined Financial Statements 5-10
<PAGE> 7
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED BALANCE SHEET
MAY 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
ASSETS
<S> <C>
CURRENT
Cash $ 338,480
Accounts receivable (net of allowance for
doubtful accounts of $59,488) 2,155,850
Due from affiliates 83,329
Stockholders' loans receivable 296,495
Other current assets (Note 4) 138,920
-----------
3,013,074
PROPERTY AND EQUIPMENT (Note 5) 94,212
INTANGIBLES, NET (Note 6) 8,604
OTHER ASSETS 29,730
-----------
$ 3,145,620
===========
LIABILITIES
CURRENT
Accounts payable $ 206,481
Accrued payroll 241,650
Accrued workmen's compensation 177,680
Other accrued liabilities 35,932
Accrued death benefit (Note 9) 1,500,000
Income taxes payable 152,365
Line of credit (Note 7) 196,298
Capital lease obligation - current (Note 8) 26,225
Deferred taxes payable 413,823
-----------
2,950,454
CAPITAL LEASE OBLIGATIONS (Note 8) 14,372
-----------
2,964,826
-----------
COMMITMENTS AND CONTINGENCIES (Note 12) --
STOCKHOLDERS' EQUITY
Common stock
New York Document Exchange Corporation - ($1 par value;
authorized 200 shares; issued 150 shares) 150
Eastside-Westside, Inc. - ($5 par value; authorized 200 shares;
issued 111 shares) 555
City Courier, Inc. (No par value; authorized 200 shares;
issued 100 shares) 41,000
Additional paid-in capital 58,651
Treasury stock (500)
Stock subscription receivable (1,000)
Retained earnings 81,938
-----------
180,794
-----------
$ 3,145,620
===========
</TABLE>
See notes to combined financial statements.
Page 1 of 10
<PAGE> 8
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUE $ 21,835,219
COST OF SALES 16,657,053
------------
GROSS MARGIN 5,178,166
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,592,612
------------
OPERATING INCOME 585,554
INTEREST EXPENSE 46,388
------------
INCOME BEFORE UNDERNOTED ITEM AND INCOME TAXES 539,166
DEATH BENEFIT EXPENSE (Note 9) 1,500,000
------------
LOSS BEFORE INCOME TAXES (960,834)
INCOME TAXES (Note 10) 113,790
------------
NET LOSS $ (1,074,624)
============
</TABLE>
See notes to combined financial statements.
Page 2 of 10
<PAGE> 9
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED MAY 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
----------------------------------------------------------------------------
New York Document
Exchange Corporation Eastside - Westside, Inc. City Courier, Inc.
-------------------- ------------------------- ----------------------- Additional
Number Number Number Paid-in
of Shares Amount of Shares Amount of Shares Amount Capital
---------- ------ --------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, BEGINNING
OF YEAR 150 $150 111 $555 100 $41,000 $ 108,195
NET LOSS -- -- -- -- -- -- --
TREASURY STOCK
REACQUIRED -- -- -- -- -- -- (49,544)
--- ---- --- ---- --- ------- ---------
BALANCE, ENDING
OF YEAR 150 $150 111 $555 100 $41,000 $ 58,651
=== ==== === ==== === ======= =========
<CAPTION>
Treasury Stock
---------------------- Stock
Number Subscription Retained
of Shares Amount Receivable Earnings Total
---------- ---------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, BEGINNING
OF YEAR -- $-- $(1,000) $ 1,156,562 $ 1,305,462
NET LOSS -- -- -- (1,074,624) (1,074,624)
TREASURY STOCK
REACQUIRED 50 (500) -- -- (50,044)
-- ----- ------- ----------- -----------
BALANCE, ENDING
OF YEAR 50 $(500) $(1,000) $ 81,938 $ 180,794
== ===== ======= =========== ===========
</TABLE>
See notes to combined financial statements.
Page 3 of 10
<PAGE> 10
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDING MAY 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
OPERATING ACTIVITIES:
<S> <C>
Net loss $(1,074,624)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 52,415
Deferred income taxes (106,553)
Changes in assets and liabilities
Increase in accounts receivable (96,027)
Increase in due from affiliates (61,100)
Increase in other current assets (32,849)
Increase in accounts payable and accrued expenses 1,515,760
Increase in income taxes payable 100,897
-----------
Net cash provided by operating activities 297,919
-----------
FINANCING ACTIVITIES:
Obligations under capital lease (23,583)
Borrowings on credit facility 695,000
Repayments of credit facility (695,000)
Reacquisition of common stock (50,044)
Advances to stockholders (69,725)
-----------
Net cash used in financing activities (143,352)
-----------
INVESTING ACTIVITIES:
Acquisition of property and equipment (27,106)
Increase in other assets 2,178
-----------
Net cash used in investing activities (24,928)
-----------
NET INCREASE IN CASH 129,639
CASH, BEGINNING OF THE YEAR 208,841
-----------
CASH, END OF THE YEAR $ 338,480
===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Income taxes paid $ 68,746
Interest paid $ 46,388
===========
</TABLE>
See notes to combined financial statements.
Page 4 of 10
<PAGE> 11
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
New York Document Exchange Corporation, Eastside-Westside, Inc., and
City Courier, Inc. (collectively the "Companies") provide facility
management, overnight courier, messenger, and mail box subscription
services in the New York City metropolitan area. The majority of
revenues are earned from messenger and facilities management services.
2. PRINCIPLES OF COMBINATION
The Companies are commonly owned by a single shareholder and operate
under common management, and have been combined due to their
interdependence and form of operations. The combined financial
statements include the accounts of the Companies after all intercompany
balances have been eliminated.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Companies recognize messenger service revenue when deliveries are
completed or services are performed. Facilities management service
revenue is recognized in accordance with the terms of the customer
contract.
Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is provided annually at rates calculated to
write-off the assets over their estimated useful lives as follows:
Furniture and fixtures - 5-7 years - straight-line basis
Computer software - 5 years - straight-line basis
Leaseholds - applicable useful life or lease term
if shorter
Use of 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
and disclosure of contingent 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.
Page 5 of 10
<PAGE> 12
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes
New York Document Exchange Corporation and City Courier, Inc., with the
consent of its stockholders, have elected under the Internal Revenue and
the New York State Tax Codes to be S corporations. In lieu of
corporation income taxes, the stockholders of an S corporation are taxed
on their proportionate share of the Company's taxable income. Therefore
no provision or liability for federal income tax has been included in
the financial statements. Provision for New York state income taxes has
been included to the extent the corporate tax rate exceeds the highest
personal income tax rate. The City of New York does not recognize S
corporation status, therefore, a provision has been made for New York
City corporation taxes.
Eastside-Westside, Inc., is a C corporation, as such the financial
statements include a provision for federal, state and local corporation
taxes.
Fair Value of Financial Instruments
The financial statements include the following financial instruments:
cash, trade accounts receivable, due from affiliates, stockholders'
loans receivable, accounts payable, and the bank indebtedness. With the
exception of the bank indebtedness, no separate comparison of fair
values is presented for the aforementioned financial instruments since
their fair values are not significantly different that their balance
sheet carrying values. Based upon prevailing market interest rates, the
fair value of the bank indebtedness approximates its carrying value.
4. OTHER CURRENT ASSETS
Other current assets consist of the following:
<TABLE>
<S> <C>
Employee and messenger loans and advances $ 45,328
Prepaid expenses 25,599
Prepaid insurance 67,993
--------
$138,920
========
</TABLE>
Page 6 of 10
<PAGE> 13
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Furniture and equipment $479,307
Computer software 6,719
Leasehold improvements 26,263
--------
512,289
Accumulated depreciation 418,077
--------
$ 94,212
========
</TABLE>
Included in property and equipment are assets recorded under capital
leases aggregating $75,454, with related accumulated depreciation of
$21,877.
6. INTANGIBLES
Intangibles, arising from the purchase of assets of another company, are
carried at cost and amortized on a straight-line basis over the life of
the agreements or a period of 5 to 10 years. Intangibles consist of the
following:
<TABLE>
<S> <C>
Covenant not to compete $239,925
Customer lists 38,388
Customer contracts 50,383
Organizational costs 28,161
--------
356,857
Accumulated amortization 348,253
--------
$ 8,604
========
</TABLE>
7. LINE OF CREDIT
The line of credit is due on demand. The balance represents the amount
drawn on a $300,000 revolving line of credit. The outstanding balance
may not exceed 80% of eligible accounts receivable as defined. The loan
is evidenced by ninety-day notes which bear interest at the prime rate
plus 2%. The loan is guaranteed by the stockholders' of the Companies.
Interest on the note payable for the year amounted to $17,887.
The stockholders of the Companies have negotiated a credit facility with
a bank, whereby the stockholders may borrow up to $750,000 under a
demand note payable, bearing interest at the bank's base lending rate
plus 1% per annum. The proceeds of this loan are for the direct use of
the Companies. Borrowings under this agreement have been guaranteed by
the stockholders, with a cross guaranty by the Companies. The bank has
further secured the loan by a lien on the Companies' assets. At May 31,
1997 no outstanding balance existed. Interest expense incurred during
the year related to this loan amounted to $19,601.
Page 7 of 10
<PAGE> 14
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
8. LEASES
The Companies are obligated under various non-cancellable capital and
operating leases for computer and office equipment, and storage space.
Rent expense, under the operating leases aggregated $180,521, for the
year ended May 31, 1997. Minimum future rental commitments under the
capital and operating leases at May 31, 1997 are as follows:
<TABLE>
<CAPTION>
Capital
Lease Operating
Obligations Leases
----------- ------
<S> <C> <C>
1998 $ 30,249 $148,442
1999 15,241 113,510
2000 -- 108,417
2001 -- 72,117
2002 -- 40,058
-------- --------
TOTAL MINIMUM PAYMENTS 45,490 $482,544
========
LESS: AMOUNT REPRESENTING INTEREST (4,893)
--------
TOTAL PRESENT VALUE OF NET MINIMUM
LEASE PAYMENTS AT MAY 31, 1997 40,597
LESS: CURRENT PORTION (26,225)
--------
LONG-TERM PORTION $ 14,372
========
</TABLE>
Interest expense includes $8,900 with respect to these capital lease
obligations.
9. ACCRUED DEATH BENEFIT
On August 15, 1996 Eastside-Westside, Inc. entered into a salary
continuation and death benefit agreement with a stockholder. The
agreement stated that in the event of the stockholder's death, which
occurred in November 1996, the spouse or the estate is entitled to
receive weekly payments for a period of ten years, and other related
benefits. If during the term of the agreement, Eastside-Westside, Inc.
is sold, the spouse or the estate then becomes entitled to receive
immediate payment. This amount is estimated at $1,500,000 and due to the
pending sale of Eastside-Westside, Inc. the amount has been accrued as a
current liability and included in the determination of the net loss for
the year.
Page 8 of 10
<PAGE> 15
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
10. PROVISION FOR FEDERAL, STATE AND LOCAL INCOME TAXES
Provisions for federal, state and local income taxes consist of the
following:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $ 80,740 $ (40,535) $ 40,205
State 32,090 (9,110) 22,980
Local 42,215 8,390 50,605
--------- --------- --------
$ 155,045 $ (41,255) $113,790
========= ========= ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
The sources of the net deferred tax liability relate
to differences between accrual and cash accounting $ 413,823
==========
In addition to the amount disclosed above, there is a potential tax
benefit of approximately $680,000 related to the death benefit expense,
which has been offset by a valuation allowance.
The effective tax rate on income before taxes differs from the United
States statutory rate. The following summary reconciles taxes at the
United States statutory rate with the effective rates:
<TABLE>
<S> <C>
Taxes on income at U.S. statutory rate 34.0%
Increase (reduction) in taxes resulting from
State and local income taxes (net of federal tax benefit) 9.0
Corporations taxed as electing S corporation status (25.2)
Vacation allowance (32.9)
Other 3.3
-----
Taxes on income at effective rates (11.8)%
</TABLE> =====
Page 9 of 10
<PAGE> 16
NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
11. RELATED PARTY TRANSACTIONS
The Companies have advanced funds to three of their stockholders which
are non-interest bearing and are due on demand. Amounts due to the
Companies from these stockholders totalled $296,495 as of May 31, 1997.
The Companies provide services to a company which is controlled by a
stockholder. $1,888,035 is included in revenue. At May 31, 1997 the
balance due from this Company totalled $19,579.
New York Document Exchange Corporation utilizes the services of
independent contractors that are employed by a company which is
controlled by a stockholder. For the year ended May 31, 1997, $1,888,035
of services are included in Trucking expense. At May 31, 1997 $62,565 is
owed to the Companies.
12. COMMITMENTS AND CONTINGENCIES
New York Document Exchange Corporation and City Courier, Inc. are
currently being audited by the United States Department of Labor, Wage
and Hour Division, to determine if they are in compliance with the Fair
Labor Standards Act. To date, the Department of Labor has not issued an
assessment nor has it quantified the amount of back wages, if any, that
may be due as a result of the examination.
13. LETTER OF INTENT
On May 15, 1997, holders of the Companies' voting common stock signed a
non-binding letter of intent to sell all of the Companies' common stock.
There can be no assurances the sale will be completed.
Page 10 of 10
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 Stock Purchase Agreement dated September 30, 1997 by and among
Dynamex Inc. and the Shareholders of City Courier, Inc., New York
Document Exchange Corporation and Eastside/Westside, Inc.
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated the 30th day
of September, 1997, is by and among Dynamex Inc., a Delaware corporation
("Purchaser"), and each of the individual persons listed on Schedule 2.1 hereto
(such persons being herein referred to individually as a "Shareholder" and
collectively herein as the "Shareholders").
W I T N E S S E T H:
WHEREAS, each of City Courier, Inc. ("CCI"), New York Document
Exchange Corporation ("Nydex") and Eastside/Westside Inc. ("Eastside") are
engaged in the same-day transportation, messenger and facilities management
business (the "Business") (Each of CCI, Nydex and Eastside shall be referred to
herein individually as the "Company" and collectively as the "Companies"); and
WHEREAS, the Shareholders collectively own, directly or indirectly,
all of the outstanding capital stock (collectively, the "Shares") of the
Companies; and
WHEREAS, the Shareholders desire to sell to Purchaser, and Purchaser
desires to purchase from the Shareholders, their respective Shares on the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. SALE AND PURCHASE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Upon the terms and subject to
the conditions set forth in this Agreement, at the Closing (as defined in
Section 2.2 hereof), the Shareholders shall assign, transfer, convey and
deliver to Purchaser, and Purchaser shall purchase from the Shareholders, all
right, title and interest in and to all of the Shares, free and clear of all
liens, security interests, charges, encumbrances and rights of others.
1.2 CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS. At the
Closing, Purchaser and each Shareholder shall enter into a confidentiality and
non-competition agreement in the form of Schedule 1.2 hereto (collectively, the
"Non-Competition Agreements").
1.3 EXCLUDED ASSETS. Notwithstanding anything to the contrary in
this Agreement, the assets designated as excluded assets on Schedule 1.3
attached hereto and made a part hereof (the "Excluded Assets") shall not be
owned or owed, respectively, by the Companies at the time of the Closing.
1
<PAGE> 2
1.4 SECTION 338(h)(10) ELECTION; AUDITS.
(a) Purchaser and the Shareholders will join in making an election
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the
"Code"), as to CCI and Nydex, and any comparable elections under any state or
local income tax law (each, a "Section 338(h)(10) Election"). The Purchaser
will prepare and file all documents and materials necessary in connection with
making a Section 338(h)(10) Election, and the Shareholders agree to assist the
Purchaser and cooperate with the Purchaser in connection therewith. The fair
market value of the assets of CCI and Nydex for purposes of any such Section
338(h)(10) Election shall be as mutually agreed by Purchaser and David
Steinhurst (the "Shareholder Representative") as set forth in Schedule 1.4
hereto. The Purchaser and the Shareholders will file all tax returns in a
manner consistent with the Section 338(h)(10) Election and the valuation of the
assets as so determined. The Shareholders of Nydex and CCI are solely
responsible for the payment of, and shall pay, all federal, state and local
income taxes, penalties and interest of Nydex and CCI with respect to the
Section 338(h)(10) election.
(b) The Shareholders shall control and be solely responsible for
the conduct of any federal, state or local income tax issues raised in any tax
audit relating to the Section 338(h)(10) Election (an "Election Audit") through
counsel of its own choosing and shall bear all expenses incurred in connection
therewith. Purchaser shall be kept fully informed concerning all aspects of
and at all stages of any Election Audit. Purchaser shall use reasonable
efforts to cooperate with the Shareholders in connection with any Election
Audit or other audits of CCI or Nydex relating to any period prior to the
Closing. Purchaser shall promptly notify the Shareholders of an Election Audit
or other audit relating to periods ending on or prior to the Closing Date in
accordance with Section 9 hereof. The Shareholders shall assume the
responsibility for preparing all federal and state income tax returns of Nydex,
Eastside and CCI relating to periods ending on or prior to the Closing Date.
2. CONSIDERATION: CLOSING
2.1 PURCHASE PRICE. The consideration to be received by the
Shareholders in exchange for the Shares, which consideration shall be
apportioned among them in accordance with Schedule 2.1 hereto, shall be the
aggregate sum of $12,100,000, payable in cash at the Closing by wire transfer
to the accounts specified by the Shareholders.
2.2 TIME OF CLOSING. A closing (the "Closing") for the sale and
purchase of the Shares shall be at the law offices of Zukerman Gore & Brandeis,
LLP located at 900 Third Avenue, New York, New York 10022 simultaneously with
the mutual execution and delivery of this Agreement, or at such other place or
places as may be agreed upon by the Purchaser and the Shareholders. The day on
which the Closing actually takes place is hereinafter sometimes referred to as
the "Closing Date".
2
<PAGE> 3
2.3 CLOSING PROCEDURE. At the Closing, the Shareholders shall
deliver to Purchaser their respective stock certificates duly endorsed to
Purchaser and representing the Shares, in form sufficient to vest record and
beneficial title fully in Purchaser to the Shares. Purchaser shall issue and
deliver to the Shareholders the purchase price as described in Section 2.1
above. Each party will cause to be prepared, executed and delivered all
documents required to be delivered by such party pursuant to Article 5 hereof
and all other appropriate and customary documents as another party or its
counsel may reasonably request prior to the Closing Date for the purpose of
consummating the transactions contemplated by this Agreement. Other than as
set forth in Section 2.6, all actions taken at the Closing shall be deemed to
have been taken simultaneously at 12:01 a.m., New York, New York time on the
Closing Date.
2.4 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(a) No later than 60 days after the Closing Date,
Purchaser shall prepare and deliver to the Shareholder Representative
an unaudited consolidated balance sheet of the Companies as of the
Closing Date (the "Closing Balance Sheet") prepared in accordance with
generally accepted accounting principles used to prepare the Seller
Financial Statements (as defined in Section 3.16). Purchaser shall
promptly make available to the Shareholder Representative all work
papers and other pertinent information used in connection therewith.
(b) Within 30 days after the Closing Balance Sheet is
delivered to the Shareholder Representative pursuant to subsection (a)
above, the Shareholder Representative shall complete its examination
thereof and shall deliver to Purchaser either (i) a written
acknowledgment accepting the Closing Balance Sheet or (ii) a written
report (the "Objection Report") setting forth in reasonable detail any
proposed objections to the Closing Balance Sheet. A failure by the
Shareholder Representative to deliver the Objection Report within the
required 30-day period shall constitute his acceptance of the
calculations set forth in the Closing Balance Sheet.
(c) During a period of 20 days following the receipt by
Purchaser of the Objection Report, the Shareholder Representative and
Purchaser shall attempt to resolve any differences they may have with
respect to the matters raised in the Objection Report. In the event
the Shareholder Representative and Purchaser fail to agree on any of
Purchaser's proposed adjustments contained in the Objection Report
within such 20-day period, then the parties will request that the New
York city office of KPMG Peat Marwick, LLP, certified public
accountants ("Independent Auditors"), make the final determination
with respect to the correctness of the proposed adjustments in the
Objection Report in light of the terms and provisions of this
Agreement. Each of the parties hereto represents and warrants that
such party has not engaged the Independent Auditors and that the
Independent Auditors are not affiliated with such party, and such
party further agrees not to engage the Independent Auditors until such
time as any post-closing price adjustment has been determined. The
decision of the Independent Auditors shall be final and binding
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on the parties. The costs and expenses of the Independent Auditors
and their services rendered pursuant to this subsection shall be borne
equally by the Shareholders, on the one hand, and Purchaser on the
other hand.
(d) If, after finalization of the Closing Balance Sheet
(which shall be deemed to mean either the acceptance by the
Shareholder Representative of the Closing Balance Sheet in accordance
with Section 2.4(b) above or, if the Shareholder Representative
delivers an Objection Report, upon receipt by Purchaser and the
Shareholder Representative of the written final determination rendered
pursuant to Section 2.4(c) concerning the resolution of the matters
raised in the Objection Report pursuant to Section 2.4(c) above), the
Adjusted Working Capital (as defined herein) of the Companies as set
forth on the Closing Balance Sheet is less than or more than $215,000,
then the cash portion of the Purchase Price shall be immediately
reduced (in the event of a deficiency) or increased (in the event of a
surplus), effective as of the Closing Date, by the amount of such
deficiency or surplus, as the case may be. Any adjustments to the
Purchase Price made in accordance with this Section 2.4(d) shall be
payable to the Purchaser (in the case of a deficiency) or the
Shareholders (in the case of a surplus) in the form of cash. For
purposes of this Agreement, "Adjusted Working Capital" shall mean (x)
the Companies' combined current assets (excluding cash and amounts due
from Shareholders and affiliates, without regard to the classification
of such assets as current or long-term for purposes of generally
accepted accounting principles), less (y) the Companies' combined
current liabilities (including, but not limited to, the Bank Debt, the
long-term portion of any capital leases and any deferred taxes
relating to Eastside, without regard to the classification of such
liabilities as current or long-term for purposes of generally accepted
accounting principles, and excluding the Shapiro Payment (defined in
Section 2.6)) computed in accordance with generally accepted
accounting principles, but after giving effect to the exclusion of the
Excluded Assets.
(e) The Shareholder Representative shall have the power
and authority to bind all Shareholders and to execute all instruments,
agreements and other documents with respect to this Section 2.4.
2.5 REPAYMENT OF BANK DEBT. At the Closing, the Purchaser shall
repay the Bank Debt (as defined in Section 3.22 hereof ).
2.6 SHAPIRO PAYMENT. Immediately upon the Closing, the Purchaser
shall cause Eastside to deliver by wire transfer to the Escrow Agent (as
defined in that certain Escrow Agreement by and between Dynamex and Zukerman
Gore & Brandeis, LLP) cash in the aggregate amount of $1,500,000 (the "Shapiro
Payment"), which amount shall be disbursed by the Escrow Agent to Lorrie
Shapiro as set forth in the Escrow Agreement. The Purchaser and the
Shareholders agree that payment of this obligation by Eastside shall be
reflected on Eastside's books and records for the tax period commencing after
the Closing Date.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SHAREHOLDERS.
The Shareholders, jointly and severally, represent and warrant to
Purchaser the following; provided, however, that (i) with respect to each
subsection of Section 3 hereof, each Shareholder represents and warrants to
Purchaser only to the extent such representations and warranties relate to
those Companies in which such Shareholder owns Shares (which ownership is set
forth on Schedule 2.1 hereto), (ii) with respect to Sections 3.2, 3.3, 3.15 and
3.20 hereof, each Shareholder represents and warrants to Purchaser only to the
extent such representations and warranties relate to such Shareholder and (iii)
other than the representations and warranties made by him to Purchaser in
Sections 3.2,3.3, 3.5, and 3.15 hereof, the Shareholder known as Charles Urdang
("Urdang"), does not make any of the representations and warranties to
Purchaser set forth in this Section 3; notwithstanding the foregoing, Urdang
remains subject to and liable for the Shareholders' indemnification obligations
set forth in Sections 8 and 9 hereof:
3.1 ORGANIZATION: GOOD STANDING. Each of the Companies is a
corporation, duly incorporated, validly existing and in good standing under the
laws of its incorporation and has all requisite corporate power and authority
to own and lease its properties and assets and to carry on its business as
currently conducted. Each of the Companies has no subsidiaries and no equity,
profit sharing, participation or other ownership interest (including any
general partnership interest) in any corporation, partnership, limited
partnership or other entity other than as listed on Schedule 3.1 hereto. Each
of the Companies is duly qualified and licensed to do business and is in good
standing in all jurisdictions where such qualification is required, a list of
which is set forth on Schedule 3.1.
3.2 DUE AUTHORIZATION. The Shareholders have full power and
authority to enter into and perform this Agreement and the Non-Competition
Agreements, to the extent same is a party thereto and to carry out the
transactions contemplated hereby and thereby.
3.3 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by the Shareholders and constitutes their legal, valid and
binding obligation, enforceable against each of them in accordance with its
terms, except as may be limited by the availability of equitable remedies or by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally. The execution and delivery by the
Shareholders of this Agreement, the execution and delivery by the Shareholders
of the Non-Competition Agreement to which same is a party and the consummation
of the transactions contemplated hereby and thereby will not: (i) conflict
with or result in a breach of the certificate of incorporation or bylaws of the
Companies, (ii) violate any law, statute, rule or regulation or any order,
writ, injunction or decree of any court or governmental authority, or (iii)
violate or conflict with or constitute a default under (or give rise to any
right of termination, cancellation or acceleration under) any indenture,
mortgage, lease, contract or other instrument to which the Companies or any
Shareholder is a party or by which they are bound or affected.
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3.4 GOVERNMENTAL CONSENTS. No approval, authorization, consent,
order or other action of, or filing with, any governmental authority or
administrative agency is required in connection with the execution and delivery
by the Companies and the Shareholders of this Agreement or the consummation of
the transactions contemplated hereby. Except as set forth on Schedule 3.4, no
approval, authorization or consent of any other third party is required in
connection with the execution and delivery by the Shareholders of this
Agreement and the consummation of the transactions contemplated hereby.
3.5 TRANSACTIONS WITH AFFILIATES.
(a) Except as set forth on Schedule 3.5 annexed hereto,
at the time of the Closing, none of the shareholders, officers,
employees or directors of any Company or any of foregoing persons'
Affiliates (as defined herein) will (i) have any interest in or will
own any property or right used principally in the conduct of the
Business, except for the ownership of the Excluded Assets, (ii) have
any security interest in or any lien, encumbrance or other claim on
any asset or property of any Company, or (iii) have made any advance,
loan or extension of credit to any Company that has not been repaid in
full or converted to and distributed as compensation at the time of
the Closing nor does such person or entity have any amounts owned to
them from any of the Companies at such time. The term "Affiliate"
shall mean, with respect to each Company, any Shareholder or any of
the officers, employees and directors, any partner of any such person,
or any member of the immediate family (including brother, sister,
descendant, ancestor or in-law) of any such person, or any
corporation, partnership, trust or other entity in which any such
person or any such family member has a substantial interest or is a
director, officer, partner or trustee.
(b) Each Shareholder will and will cause any of such
Shareholder's Affiliates to promptly deliver any documents and
instruments in form and substance satisfactory to Purchaser, as
Purchaser may reasonably require to evidence the termination of any
obligations of any Company to such Shareholder or such Shareholder's
Affiliate, the release of all collateral with respect to any such
obligations, the repayment of any indebtedness related thereto and the
satisfaction of all obligations thereunder. In addition, each
Shareholder agrees to and will cause his Affiliate to prepare and file
with the appropriate jurisdictions uniform commercial code termination
statements relating to any financing statements filed with respect to
any of such obligations, and to provide Purchaser with evidence of the
acceptance of such filing by the respective jurisdictions.
3.6 TITLE TO ASSETS. Each of the Companies is the sole and
exclusive legal owner of all right, title and interest in, and has good and
marketable title to, all of the assets of the Business (other than the Excluded
Assets) that it purports to own (the "Assets"), free and clear of liens, claims
and encumbrances except (i) liens, claims and encumbrances to be released at
Closing, (ii) liens for taxes not yet payable, and (iii) liens set forth on
financing statements filed with respect
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to any and all leases of the Companies, a listing of which is attached as
Schedule 3.6 annexed hereto.
3.7 REAL ESTATE.
(a) None of the Companies owns or, in the last five
years, has owned any real property. With respect to the real property
leased by the Companies in connection with the Business (the "Leased
Real Estate"), (i) applicable zoning ordinances permit the operation
of the Business at the Leased Real Estate, (ii) the Leased Real Estate
is not located within a flood or lakeshore erosion hazard area, and
(iii) neither the whole nor any portion of the Leased Real Estate has
been condemned, requisitioned or otherwise taken by any public
authority, and no notice of any such condemnation, requisition or
taking has been received by the Companies. To the Shareholder
Representative's knowledge, (x) no such condemnation, requisition or
taking is threatened or contemplated, and (y) there are no pending
public improvements which may result in special assessments against or
which may otherwise affect the Leased Real Estate. The Companies have
delivered to Purchaser accurate copies of all leases and other
agreements relating to the Leased Real Estate.
(b) Neither the Companies nor the Shareholders has
received notice of, or has any actual knowledge of, any material
violation of any zoning, building, health, fire, water use or similar
statute, ordinance, law, regulation or code in connection with the
Leased Real Estate.
(c) Neither the Companies nor the Shareholders has
received notice of, or has actual knowledge of, any hazardous or toxic
material (as hereinafter defined) existing in any structure located
on, or existing on or under the surface of, any of the Leased Real
Estate which is, in any case, in material violation of any applicable
environmental law. For purposes of this Section, "hazardous or toxic
material" shall mean waste, substance, materials, smoke, gas or
particulate matter designated as hazardous, toxic or dangerous under
any environmental law. For purposes of this Section, "environmental
law" shall included the Comprehensive Environmental Response
Compensation and Liability Act, the Clean Air Act, the Clean Water Act
and any other applicable federal, state or local environmental, health
or safety law, rule or regulation relating to or imposing liability or
standards concerning or in connection with hazardous, toxic or
dangerous waste, substance, materials, smoke, gas or particulate
matter.
3.8 FIXED ASSETS; INSURANCE. All of the fixed assets of the
Companies are in good condition and working order, ordinary wear and tear
excepted, and are suitable for the uses for which they are intended, free from
any known defects except such minor defects as do not substantially interfere
with the continued use thereof. The fixed assets of Eastside as of March 31,
1997 and the fixed assets of CCI and Nydex as of December 31, 1996 are set
forth on the tax depreciation schedule on Schedule 3.8. Since March 31, 1997
(with respect to Eastside), and since December 31, 1996 (with respect to CCI
and Nydex), there has not been any material change in
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such fixed assets. The Companies have in force such insurance of its properties
and operations as is set forth on Schedule 3.8.
3.9 GOVERNMENTAL LICENSES. Schedule 3.9 lists and accurately
describes all licenses, permits, orders, approvals, authorizations and filings
issued to the Companies by a governmental or regulatory authority in connection
with the lawful ownership and operation of the Company's business (the
"Governmental Licenses"), except where the failure to hold such Governmental
Licenses would not have a material adverse effect on the Companies. The
Companies have furnished to Purchaser true and accurate copies of all such
Governmental Licenses, and each Governmental License is in full force and
effect and is valid under applicable federal, state and local laws.
3.10 TAXES
(a) All tax reports and returns relating to any Company's
assets and operations (including sales, use, income, property,
franchise and employment taxes) that are due have been filed with the
appropriate federal, state and local governmental agencies, and,
except as set forth on Schedule 3.10 annexed hereto, the Companies
have paid all taxes, penalties, interest, deficiencies, assessments or
other charges due as reflected on the filed returns or claimed to be
due by such federal, state or local taxing authorities (other than
taxes, deficiencies, assessments or claims which are being contested
in good faith and which in the aggregate are not material). There are
no examinations or audits pending or unresolved examinations or audit
issues with respect to any Company's federal, state or local tax
returns. All additional taxes, if any, assessed as a result of such
examinations or audits have been paid. There are no pending claims or
proceedings relating to, or asserted for, taxes, penalties, interest,
deficiencies or assessments against the Companies. The Companies have
delivered to Purchaser true, accurate and complete copies of all tax
returns and filings made by them in the last three years and any
related correspondence from the Companies, the Shareholders or
applicable taxing authority relating to such returns and filings. No
representation is made as to the taxes arising from the Section
338(h)(10) Election.
(b) Each of CCI and Nydex is an S Corporation as defined
in Section 1361 of the Code and has been an S Corporation since the
date of its respective incorporation.
3.11 LITIGATION. Except as set forth on Schedule 3.11 annexed
hereto, there is no order of any court, governmental agency or authority and no
action, suit, proceeding or investigation, judicial, administrative or
otherwise, of which the Companies or the Shareholders have actual knowledge
that is pending or threatened against or affecting the Companies which, if
adversely determined, might materially and adversely affect the business,
operations, properties, assets or conditions (financial or otherwise) of the
Companies or which challenges the validity or propriety of any of the
transactions contemplated by this Agreement.
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3.12 REPORTS AND GOVERNMENTAL COMPLIANCE. The Companies have duly
filed all reports required to be filed by law or applicable rule, regulation,
order, writ or decree of any court, governmental commission, body or
instrumentality and have made payment of all charges and other payments, if
any, shown by such reports to be due and payable, except where the failure to
so file or make payment would not have a material adverse effect on any
Company.
3.13 EMPLOYEE BENEFIT PLANS; LABOR CONTROVERSIES.
(a) Schedule 3.13 sets forth all liabilities of the
Companies under The Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or similar laws with respect to employee benefit
plans. Except as set forth in Schedule 3.13 annexed hereto, no "plan"
which is subject to Part 3 of Subtitle B of Title I of ERISA or
Section 412 of the Code has incurred an accumulated funding deficiency
as the term is defined in Section 302 of ERISA or Section 412 of the
Code (whether or not waived). None of the Companies nor any of their
respective affiliates has ever sponsored, adopted, maintained or been
obligated to contribute to a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA. No liability under Title IV of
ERISA has been incurred by the Companies or an affiliate thereof that
has not been satisfied in full, and no condition exists that presents
a material risk to the Companies or their affiliates of incurring
liability under such Title, other than for premiums due to the Pension
Benefit Guaranty Corporation. The Companies have made or will make
all contributions required to be made by it under any employee benefit
plan for all periods through and including the Closing Date.
(b) Except as set forth on Schedule 3.13 annexed hereto,
there are no labor disputes of a material nature pending between the
Companies, on the one hand, and any of its employees, on the other
hand, and there are no known organizational efforts presently being
made involving any of such employees. Except as set forth on Schedule
3.13 annexed hereto, the Companies have complied in all material
respects with all laws relating to the employment of labor, including
any provisions thereof relating to wages, hours, collective bargaining
and the payment of social security and other taxes, and is not liable
for any material arrearages of wages or any taxes or penalties for
failure to comply with any of the foregoing.
(c) With respect to the audit being conducted by U.S.
Department of Labor (the "DOL") disclosed on Schedule 3.13 (the "DOL
Audit"), the Shareholders have provided Purchaser with true, accurate
and complete copies of any documentation and statements of any kind
related to the DOL Audit, including without limitation, all
correspondence from and to the DOL in connection with same.
3.14 CAPITALIZATION. All of the issued and outstanding Shares have
been duly authorized and validly issued and are fully paid and nonassessable,
and are owned of record and beneficially by the respective Shareholders.
Schedule 2.1 sets forth the capitalization of each of the Companies as of the
Closing Date including the description of the Shares owned by each of the
Shareholders
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and the ownership and capitalization of each of the subsidiaries (if any) of
each of the Companies. There is no outstanding subscription, contract, option,
warrant, call or other right obligating the Companies to issue, sell, exchange
or otherwise dispose of, or to purchase, redeem or otherwise acquire, shares
of, or securities convertible into or exchangeable for, capital stock of the
Companies.
3.15 TITLE TO SHARES. The Shareholders are the lawful, sole and
beneficial owner of the Shares, free and clear of all liens, claims and
encumbrances of every kind, and, at the Closing, the Shareholders will convey
to Purchaser good and indefeasible title to the Shares.
3.16 FINANCIAL STATEMENTS AND RECORDS OF THE COMPANIES.
(a) The following financial statements of the Companies
have been prepared by Deloitte Touche Tohmatsu International
(collectively, the "Seller Financial Statements"): (i) the audited
combined balance sheet of the Companies as of May 31, 1997 and (ii)
the audited combined statement of operations, stockholders' equity and
cash flows of the Companies for the year ended May 31, 1997.
(b) The Seller Financial Statements present fairly the
assets, liabilities and financial position of the Companies as of the
dates thereof and the results of operations thereof for the periods
then ended and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis with
prior periods. The books and records of the Companies have been and
are being maintained in accordance with good business practice,
reflect only valid transactions, are complete and correct in all
material respects and present fairly in all material respects the
basis for the financial position and results of operations of the
Companies set forth in the Seller Financial Statements.
3.17 ABSENCE OF CERTAIN CHANGES. For the period commencing May 31,
1997 and ending on the Closing Date, the Companies have not (i) suffered any
change in its financial condition or results of operations other than changes
in the ordinary course of business that, individually or in the aggregate, have
had a material adverse effect on the Companies, (ii) acquired or disposed of
any asset, or incurred, assumed, guaranteed or endorsed any liability or
obligation, or subjected or permitted to be subjected any material amount of
assets to any lien, claim or encumbrance of any kind, except in the ordinary
course of business, (iii) entered into or terminated any Material Contract (as
hereinafter defined), or agreed or made any material changes in any Material
Contract, other than renewals and extensions thereof in the ordinary course of
business, (iv) declared, paid or set aside for payment any dividend or
distribution with respect to its capital stock, (v) entered into any collective
bargaining, employment, consulting, compensation or similar agreement with any
person or group, or (vi) entered into, adopted or amended any employee benefit
plan.
3.18 MATERIAL UNDISCLOSED LIABILITIES. Other than as set forth on
the Seller Financial Statements, there are no liabilities or obligations of the
Companies of a nature required to be
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disclosed on financial statements prepared in accordance with generally
accepted accounting principles.
3.19 CONTRACTS AND AGREEMENTS. Schedule 3.19 contains a list,
complete and accurate in all material respects, of all of the following
categories of contracts and agreements to which the Companies are bound at the
date hereof: (i) employee benefit plans, employment, consulting or similar
contracts, (ii) contracts relating to leasehold interests, (iii) contracts that
involve remaining aggregate payments by the Companies in excess of $10,000 or
which have a remaining term in excess of one year, (iv) insurance policies, and
(v) other contracts not made in the ordinary course of business (collectively
the "Material Contracts"). The Companies are not in default with respect to
any of the Material Contracts.
3.20 COMPLETENESS OF DISCLOSURE. No representation or warranty by
the Shareholders in this Agreement nor any certificate, schedule, statement,
document or instrument furnished or to be furnished to Purchaser pursuant
hereto, or in connection with the negotiation, execution or performance of this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make any statement herein or therein not misleading. A
representation or warranty contained in this Section 3 shall be deemed waived
in the event and only to the extent that Purchaser actually knew that such
representation or warranty was inaccurate on the date hereof, provided that
such actual knowledge shall not affect any other representation or warranty in
this Section 3 or otherwise in this Agreement.
3.21 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by the
Shareholders directly with Purchaser. No person has as a result of any
agreement or action of the Companies or the Shareholders any valid claim
against any of the parties hereto for a brokerage commission, finder's fee or
other like payment.
3.22 BANK DEBT. The aggregate amount of the Companies' obligations
(exclusive of capital lease obligations) to banks and similar financial and
lending institutions (the "Bank Debt") does not exceed $1,006,496.
3.23 SCHEDULES. The omission of an item from one section of any
Schedule annexed hereto shall not constitute a breach of the corresponding
representation and warranty in this Agreement if such item is disclosed in
another Schedule and expressly cross-referenced to the pertinent Schedule.
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4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Shareholders as follows:
4.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own
and lease its properties and carry on its business as currently conducted.
4.2 DUE AUTHORIZATION. Purchaser has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the Non-Competition
Agreements, to extent same is a party thereto, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Purchaser.
4.3 EXECUTION AND DELIVERY. This Agreement has been duly executed
and delivered by Purchaser and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as may
be limited by the availability of equitable remedies or by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally. The execution and delivery by Purchaser of this
Agreement and the Non-Competition Agreements and the consummation of the
transactions contemplated hereby and thereby will not: (i) conflict with or
result in a breach of the certificate of incorporation or bylaws of Purchaser,
(ii) violate any law, statute, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority, or (iii) violate
or conflict with or constitute a default under (or give rise to any right of
termination, cancellation or acceleration under) any indenture, mortgage,
lease, contract or other instrument to which Purchaser is a party or by which
it is bound or affected.
4.4 FINDERS AND BROKERS. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
Purchaser directly with the Shareholders and the Companies. No person has as a
result of any agreement or action of Purchaser any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or other like
payment.
4.5 LITIGATION. There is no order of any court, governmental
agency or authority and no action, suit, proceeding or investigation, judicial,
administrative or otherwise, of which the Purchaser has actual knowledge that
is pending or threatened against or affecting the Purchaser which challenges
the validity or propriety of any of the transactions contemplated by this
Agreement.
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5. DOCUMENTS TO BE DELIVERED AT CLOSING
5.1 TO PURCHASER. At the Closing, there shall be delivered to
Purchaser:
(a) the Shares, together with duly executed stock powers,
in form satisfactory to Purchaser and its counsel;
(b) the Non-Competition Agreements
(c) the Employment Agreements by and between the
Purchaser and Ronnie Schild, Michael Salerno, Ralph Grotto and Lee
Eichenbaum;
(d) the Consulting Agreement by and between the Purchaser
and the Shareholder Representative
(e) opinion of counsel to the Shareholders, dated as of
the Closing Date, in form reasonably acceptable to Purchaser;
(f) a copy of all consents and approvals of governmental
agencies, and from any other third parties required to consummate the
transactions contemplated by this Agreement;
(g) resignations of all the officers and directors of the
Companies from such positions and from their employment with the
Companies;
(h) the corporate minute books and stock books of the
Companies; and
(i) all other items reasonably requested by Purchaser.
5.2 TO THE SHAREHOLDERS. At the Closing, there shall be delivered
to the Shareholders:
(a) the purchase price as contemplated by Section 2.1
hereof;
(b) an opinion of Purchaser's counsel, dated the Closing
Date, in form reasonably acceptable to the Shareholders;
(c) a certified copy of resolutions adopted by the Board
of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement; and
(d) all other items reasonably requested by the
Shareholders.
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6. SURVIVAL
All representations, warranties, covenants and agreements made by any
party to this Agreement or pursuant hereto shall be deemed to be material and
to have been relied upon by the parties hereto and shall survive the Closing
for a period of eighteen months; provided, however, that the representations
contained in Section 3.10 shall survive until the statute of limitations with
respect to tax matters expires; and provided further, that the representations
contained in Sections 3.14 and 3.15 shall survive indefinitely. Other than as
set forth in Section 3.20 hereof, the representations and warranties hereunder
shall not be affected or diminished by any investigation at any time by or on
behalf of the party for whose benefit such representations and warranties were
made. All statements contained herein or in any certificate, exhibit, list or
other document delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties.
7. INDEMNIFICATION OF THE SHAREHOLDERS
Purchaser shall indemnify and hold the Shareholders harmless from,
against, for and in respect of:
(a) any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by
the Shareholders because of the breach of any written representation,
warranty, agreement or covenant of Purchaser contained in or made in
connection with this Agreement;
(b) any and all liabilities, obligations, claims and
demands (other than liabilities, obligations, claims and demands for
which the Purchaser is indemnified pursuant to Section 8 below)
arising out of the ownership and operation of the Companies on and
after the Closing Date, except to the extent the same arises from a
breach of any written representation, warranty, agreement or covenant
of any of the Companies or any Shareholder contained in or made in
connection with this Agreement; and
(c) all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by the
Shareholders in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified
against in this Section 7.
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8. INDEMNIFICATION OF PURCHASER
The Shareholders shall indemnify and hold Purchaser harmless from,
against, for and in respect of:
(a) any and all damages, losses, payments, obligations,
liabilities, claims, actions or causes of action and encumbrances
suffered, sustained, incurred or required to be paid by Purchaser
because of the breach of any written representation, warranty,
agreement or covenant of the Companies or any Shareholder contained in
or made in connection with this Agreement;
(b) all liabilities and obligations of the Companies
relating to periods prior to Closing other than (i) liabilities set
forth on the Seller Financial Statements, (ii) liabilities incurred in
the ordinary course of business since May 31, 1997 and (iii)
liabilities disclosed in the Agreement on Schedules 3.1, 3.4, 3.6,
3.8, 3.9, and 3.19 (but excluding the following disclosed matters:
(x) the DOL Audit; and (y) any obligations or liens represented by
financing statements disclosed on Schedule 3.6(i) or any agreements
relating to the Bank Debt (other than the Purchaser's obligation to
repay the Bank Debt set forth in Section 2.5 hereof));
(c) any and all payments, fines, penalties, damages,
expenses, losses, obligations or liabilities, suffered, sustained or
incurred in connection with or arising from the DOL Audit, including
without limitation any accounting and attorney fees incurred in
connection with the DOL Audit or any penalties or payments resulting
therefrom;
(d) any federal, state or local income tax incident to or
arising from the Section 338(h)(10) Election; and
(e) all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by
Purchaser in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified
against in this Section 8.
9. GENERAL RULES REGARDING INDEMNIFICATION
(a) The obligations and liabilities of each indemnifying
party hereunder with respect to claims resulting from the assertion of
liability by the other party or indemnified third parties shall be
subject to the following terms and conditions:
(i) The indemnified party shall give prompt
written notice (which is no event shall exceed 20 days from
the date on which the indemnified party first became aware of
such claim or assertion) to the indemnifying party of any
claim which might give rise to a claim by the
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indemnified party against the indemnifying party based on the
indemnity agreements contained in Section 7 or 8 hereof,
stating the nature and basis of said claims and the amounts
thereof, to the extent known;
(ii) If any action, suit or proceeding is brought
against the indemnified party with respect to which the
indemnifying party may have liability under the indemnity
agreements contained in Section 7 or 8 hereof, the action,
suit or proceeding shall, upon the written acknowledgment by
the indemnifying party that it is obligated to indemnify under
such indemnity agreement, be defended, conducted and
controlled (including all proceedings on appeal or for review
which counsel for the indemnified party shall deem appropriate
as reasonably determined) by the indemnifying party. If the
indemnifying party undertakes, conducts and controls the
settlement or defense of such claim, the indemnifying party
shall permit the indemnified party to participate in such
settlement or defense through counsel chosen by the
indemnified party, provided that the fees and expenses of such
counsel shall be borne by the indemnified party. With respect
to indemnification provided for hereunder, the indemnified
party shall not pay or settle any such claim so long as the
indemnifying party is contesting and defending such claim in
good faith. Notwithstanding the immediately preceding
sentence, the indemnified party shall have the right to pay or
settle any such claim that is being contested and defended in
good faith by the indemnifying party, provided that in such
event the indemnified party shall waive any right to indemnity
therefor by the indemnifying party. The indemnified party
shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is
represented by separate counsel. In the event of any claim by
a third party against an indemnified party, the defense of
which is being undertaken and controlled by the indemnifying
party, the indemnified party will use its reasonable efforts
to make available to the indemnifying party those employees
whose assistance, testimony or presence is necessary to assist
the indemnifying party in evaluating and in defending any such
claims.
(iii) The Shareholder Representative shall have the
power and authority to bind all Shareholders and to execute
all instruments, agreements and other documents with respect
to Sections 7 through 9 hereof.
(iv) The indemnified party shall make available to
the indemnifying party and its attorneys and accountants all
books and records of the indemnified party relating to such
proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may
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reasonably require of each other in order to ensure the proper
and adequate defense of any such action, suit or proceeding.
(v) Any indemnifiable liability or reimbursement
under Section 7 or 9 hereof shall be limited to the amount of
damages (of any nature) actually sustained by a party hereto,
net of any applicable insurance payments actually received,
other reimbursement or tax benefit actually realized by such
party.
(vi) The indemnified party shall not make any
claim hereunder until it has incurred a cumulative aggregate
of $150,000 of expenses for which indemnification is otherwise
provided hereunder, in which case the Shareholders on the one
hand, or the Purchaser on the other hand, as the case may be,
shall be responsible for only those amounts in excess of such
$150,000 basket, provided that the limitation set forth in
this subparagraph (vi) shall not apply with respect to (A) any
adjustment under Section 2.4 or (B) any claim for
indemnification under Section 8(c);
(vii) The indemnified party shall not make any
claim hereunder with respect to any matter in which the
aggregate losses and expenses relating to such matter do not
exceed $2,000 (nor shall such de minimus claims count against
the $150,000 basket set forth in subparagraph (vi) above).
(viii) Notwithstanding anything contained in this
Agreement to the contrary, each Shareholder shall not be
required to indemnify the Purchaser pursuant to this Agreement
for any amounts in excess of the portion of the Purchase Price
received by such Shareholder as set forth on Schedule 2.1
annexed hereto plus (A) such Shareholder's ratable portion of
the Bank Debt and (B) with respect to the Shareholder
Representative, the Shapiro Payment.
(ix) Notwithstanding anything contained in this Agreement
to the contrary, no Shareholder shall be required to indemnify the
Purchaser pursuant to Section 7 for obligations of a Company in which
such Shareholder did not own Shares. Schedule 2.1 sets forth the
Shares owned by each Shareholder.
(b) Except as herein expressly provided, the remedies
provided in Sections 7 through 9 hereof shall be cumulative and shall
not preclude assertion by any party of any other rights or the seeking
of any other rights or remedies against any other party hereto.
10. ACCESS TO RECORDS. Following the Closing, the Purchaser shall afford
to the Shareholders, their respective counsel, accountants, representatives or
agents, during normal
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business hours, reasonable access to the personnel, books, records and other
data of the Companies in the Purchaser's possession with respect to periods
prior to the Closing and, at the Shareholders' expense, the right to make
copies and extracts therefrom, to the extent that such access may be reasonably
required by the requesting party (i) to facilitate the investigation,
litigation and final disposition of any claims by a third party which may have
been or may be made against any of the Shareholders or their affiliates, (ii)
to facilitate the Shareholder Representative's examination of the Closing
Balance Sheet and the determination by the parties of the Post-Closing Purchase
Price Adjustment as set forth in Section 2.4, or (iii) to fulfill a
Shareholder's obligations under this Agreement or any agreement delivered
pursuant hereto. The Purchaser agrees that for a period of not less than six
(6) years following the Closing Date, Purchaser shall not destroy or otherwise
dispose of any of those books, records or other documents held by the Companies
that relate to the properties, liabilities or operations of the Companies
before the Closing Date.
11. MISCELLANEOUS PROVISIONS
11.1 EXPENSES. Purchaser shall pay the fees and expenses incurred
by it in connection with the transactions contemplated by this Agreement and
the Shareholders shall pay the fees and expenses incurred by them and the
Companies in connection with the transactions contemplated by this Agreement.
If any action is brought for breach of this Agreement or to enforce any
provision of this Agreement, the prevailing party shall be entitled to recover
court costs, arbitration expenses and reasonable attorneys' fees.
11.2 AMENDMENT. This Agreement may be amended at any time but only
by an instrument in writing signed by the parties hereto.
11.3 NOTICES. All notices and other communications delivered
hereunder shall be in writing and shall be deemed given if delivered personally
or upon actual receipt if mailed by certified mail, return receipt requested or
delivered by nationally recognized "next-day" delivery service, to the parties
at the addresses set forth below:
If to the Shareholders:
David Steinhurst
30 Crabapple Drive
Roslyn, New York 11576
Charles Urdang
20 Buckboard Lane
Westwood, Massachusetts 02090
Ronnie Schild
1 Verton Court
East Northport, New York 11731
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Zachary Berman
222-15 77th Avenue
Bayside, New York 11364
with a copy to:
Zukerman Gore & Brandeis, LLP
900 3rd Avenue
New York, New York 10022
Attention: Nathaniel S. Gore, Esq.
Telephone: (212) 223-6700
Telecopy: (212) 223-6433
If to Purchaser:
Dynamex Inc.
1431 Greenway Drive, Suite 345
Irving, Texas 75038
Attention: Robert P. Capps
Telephone: (972) 756-8184
Telecopy: (972) 756-8199
with a copy to:
Crouch & Hallett, L.L.P.
717 N. Harwood, Suite 1400
Dallas, Texas 75201
Attention: Bruce H. Hallett
Telephone: (214) 922-4120
Telecopy: (214) 953-3154
or such other address or addresses as any party shall have designated by notice
to each other party in accordance with this Section 11.3. In addition, without
constituting notice hereunder, the parties shall use reasonable efforts to send
by facsimile to counsel for the party to whom notice is to be sent copies of
all notices sent to such party.
11.4 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the others; provided, however, that Purchaser may
assign its rights under this Agreement to any of its subsidiaries or affiliated
corporations and in such event Purchaser shall continue to have ultimate
responsibility for and hereby guarantees the performance of all obligations of
such assignee under this Agreement.
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11.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.6 HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
11.7 ENTIRE AGREEMENT. This Agreement, including, without
limitation, the Schedules, and the documents referred to herein contain the
entire understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties, conveyances
or undertaking other than those expressly set forth herein. This Agreement
supersedes any prior agreements and understandings between the parties with
respect to the subject matter, including without limitation that certain letter
agreement dated May 13, 1997 among the Purchaser and certain of the
Shareholders.
11.8 WAIVER. No attempted waiver of compliance with any
provision or condition hereof, or consent pursuant to this Agreement, will be
effective unless evidenced by an instrument in writing by the party against
whom the enforcement of any such waiver or consent is sought.
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of laws.
11.10 SEVERABILITY. The event that any of the provisions
contained in this Agreement is held to be invalid, illegal or unenforceable
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provisions had not been
contained herein.
11.11 INTENDED BENEFICIARIES. The rights and obligations
contained in this Agreement are hereby declared by the parties hereto to have
been provided expressly for the exclusive benefit of such entities as set forth
herein and shall not benefit, and do not benefit, any unrelated third parties.
11.12 MUTUAL CONTRIBUTION. The parties to this Agreement and
their counsel have mutually contributed to its drafting. Consequently, no
provision of this Agreement shall be construed against any party on the ground
that such party drafted the provision or caused it to be drafted or the
provision contains a covenant of such party.
[signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DYNAMEX INC.
By:
-----------------------------------
Robert P. Capps
Vice President
--------------------------------------
David Steinhurst
--------------------------------------
Charles Urdang
--------------------------------------
Ronnie Schild
--------------------------------------
Zachary Berman
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INDEX TO SCHEDULES
<TABLE>
<S> <C>
Schedule 1.2 Confidentiality and Non-Competition Agreements
Schedule 1.3 Excluded Assets
Schedule 1.4 Section 338(h)(10) Election
Schedule 2.1 Purchase Price Allocation
Schedule 3.1 Organization; Good Standing
Schedule 3.4 Third Party Consents
Schedule 3.5 Transactions with Affiliates
Schedule 3.6 Financing Statement relating to Leases
Schedule 3.8 Fixed Assets; Insurance
Schedule 3.9 Governmental Licenses
Schedule 3.10 Taxes
Schedule 3.11 Litigation
Schedule 3.13 Employee Benefit Plans
Schedule 3.19 Contracts and Agreements
</TABLE>
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