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The following is an excerpt from a 10-K SEC Filing, filed by DYNAMEX INC on 11/13/2001.
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DYNAMEX INC - 10-K - 20011113 - LEGAL_PROCEEDINGS

ITEM 3. LEGAL PROCEEDINGS

In November and December 1998, two class action lawsuits were filed in the United States District Court for the Northern District of Texas, naming the Company, Richard K. McClelland, the Company's Chief Executive Officer, and Robert P. Capps, the Company's former Chief Financial Officer, as defendants. The lawsuits arose from the Company's November 2, 1998 announcement that the Company was (i) revising its results of operations for the year ended July 31, 1998 from that which had been previously announced on September 16, 1998 and
(ii) restating its results of operations for the third quarter of fiscal 1998 from that which had been previously reported. On February 5, 1999, the Court entered an Order consolidating the actions and approved the selection of three law firms as co-lead counsel. A consolidated and amended complaint was filed on March 22, 1999. In addition to the defendants named in the original complaints, the amended complaint also named as defendants the underwriters of the Company's May 1998 secondary offering of common stock, Schroder & Co., Inc., William Blair & Company, and Hoak Breedlove Wesneski & Co. (the "Underwriter Defendants"). On May 6, 1999, defendants filed a motion to dismiss the consolidated and amended complaint in its entirety.

On June 14, 1999, the Company issued a press release announcing that the Audit Committee of the Board of Directors had formed a Special Committee of outside directors to review potentially unsupportable accounting entries for the third and fourth quarters of fiscal year 1998. On September 17, 1999, the Company issued a press release announcing that the Special Committee had completed its review of the Company's financial reporting and that the Company would restate its previously reported financial results for the fiscal years 1997 and 1998 and the first three quarters of fiscal year 1999.

On October 14, 1999, pursuant to a stipulation of the parties, plaintiffs filed a second amended class action complaint that added allegations relating to the information disclosed in the Company's June 14 and September 17, 1999 press releases. In addition to the defendants named in the amended complaint, the Second Amended Class Action Complaint named Deloitte & Touche and Deloitte & Touche LLP (the Court subsequently dismissed Deloitte & Touche LLP without prejudice pursuant to the stipulation of the parties). The Second Amended Class Action Complaint alleges that the defendants issued a series of materially false and misleading statements and omitted material facts concerning the Company's financial condition and business operations. The lawsuit alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The plaintiffs sought unspecified damages on behalf of all other purchasers of the Company's common stock during the period of September 18, 1997 through and including September 17, 1999 (the "Class").

On September 20, 2000, the Company, Richard McClelland, Robert Capps and the Underwriter Defendants signed a memorandum of understanding setting forth the terms of a proposed settlement of this action. Deloitte & Touche is not a party to the memorandum of understanding. On December 13, 2000, the Settling Parties signed a Stipulation of Agreement of Settlement. The settlement provides that the Company's primary directors and officers liability insurer, American Home Insurance Company, will pay $2 million towards the settlement. In addition, the Company will pay $1 million and contribute one million shares of common stock, or the cash equivalent towards the proposed settlement. The Company also agreed to pay to the class 75% of any recoveries, after legal expenses and costs, from the Company's excess insurer, Reliance Insurance Company, and former auditors, Deloitte & Touche LLP and Deloitte & Touche. A separate agreement has also been reached to settle all claims by the Company and by plaintiffs in the class action against Deloitte & Touche LLP and Deloitte & Touche for the total amount of $2.25 million.

On April 10, 2000, Reliance Insurance Company filed a notice of action in the Superior Court of Justice in Ontario, Canada, seeking a declaratory judgment that defendants in the shareholder class action are not entitled to reimbursement under the Reliance insurance policy for losses incurred in connection with that action. The Reliance policy provides $3 million in excess coverage to supplement the $2 million in coverage provided to the Company pursuant to the underlying policy issued by American Home Assurance Company.

Dynamex, Richard McClelland, and Robert Capps have filed a complaint in the United States District court for the Northern District of Texas that names Reliance Insurance Company as a defendant. The complaint alleges claims for breach of contract and breach of the duty of good faith and fair dealing arising from the failure of Reliance to contribute to the settlement of the above-referenced shareholder litigation. The plaintiffs seek unspecified damages.

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Reliance Insurance Company and Dynamex, Richard McClelland and Robert Capps have signed an agreement to settle their respective claims. Pursuant to the agreement, in the fourth quarter 2001 Reliance paid $1.9 million to the Company for the benefit of the Company and the Class.

These settlements were finalized and approved by the Court on June 29, 2001. As a result of the settlements, the Company recovered $695,000 from Reliance Insurance Company, Deloitte & Touche LLP and Deloitte & Touche including legal fees and costs incurred in connection with the Company's claims against these entities. The amount recovered is reflected in the Consolidated Statement of Operations as a reduction to the Provision for settlement of shareholder litigation. As explained above, the additional amounts recovered by the Company from Reliance Insurance Company, Deloitte & Touche LLP and Deloitte & Touche were contributed to the settlement of the shareholder class action.

The Special Committee of the Board of Directors has kept the Securities and Exchange Commission ("SEC") apprised of its inquiry and the restatement process. The Company has received informal requests for information from the Staff of the Commission for documents and testimony concerning the circumstances of the restatement of the Company's prior period financial statements. The Company has cooperated with the Commission. In early November 2001, the Company received written notification from the SEC that the inquiry into the circumstances of the restatements of the Company's financial statements has been closed with no formal action being recommended.

The Company is also a party to various legal proceedings arising in the ordinary course of its business. Management believes that the ultimate resolution of these proceedings will not, in the aggregate, have a material adverse effect on the financial condition, results of operations, or liquidity of the Company

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