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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): May 31, 1996
F.Y.I. INCORPORATED
---------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-27444 75-2560895
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
3232 McKinney Avenue
Suite 900
Dallas, Texas 75204
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(Address of Principal Executive Offices) (Zip Code)
(214) 953-7555
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(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
B&B ACQUISITION
On May 31, 1996, B&B (Baltimore-Washington) Acquisition Corp.
("B&B"), a wholly-owned subsidiary of F.Y.I. Incorporated (the
"Company"), acquired by merger B&B Information and Image
Management, Inc., ("B&B Information") pursuant to an Agreement and
Plan of Reorganization, dated as of May 31, 1996, by and among the
Company, B&B, B&B Information and Charles J. Bauer, Jr. (such
acquisition is referred to herein as the "B&B Acquisition").
The aggregate consideration paid by the Company as a result of the
B&B Acquisition was determined pursuant to arm's length
negotiations and consisted of 183,333 shares of common stock, par
value $.01 per share ("Common Stock"), of the Company and
$3,097,073 in cash. Of such 183,333 shares of Common Stock, a
total of 13,889 shares will be held in escrow for a period of 120
days from the date of closing as security against any
indemnification claim. The Common Stock issued in the B&B
Acquisition will be restricted as to resale for two years . The
purchase price is subject to a maximum adjustment of $150,000 to
the extent that actual earnings of B&B Information for the four
months ended April 30, 1996 are greater or less than $236,683, to
be determined prior to June 30, 1996.
The primary source of the cash portion of the purchase price used
in the B&B Acquisition was the Company's working capital.
PREMIER ACQUISITION
On May 31, 1996, Premier Acquisition Corp. ("Premier"), a
wholly-owned subsidiary of the Company, acquired by merger Premier
Document Management, Inc. ("Premier Document") and PDM Services,
Inc. ("PDM") pursuant to an Agreement and Plan of Reorganization
("Premier Agreement"), dated as of May 31, 1996, by and among the
Company, Premier Document and PDM and Brian E. Whiteside,
Christopher S. Moore, Lynnette C. Pomerville and Gary T. Siervert
(the "Premier Stockholders") (such acquisitions are referred to
herein as the "Premier Acquisition").
The aggregate consideration paid by the Company as a result of the
Premier Acquisition was determined pursuant to arm's length
negotiations and consisted of 69,919 shares of Common Stock and
$858,850 in cash for Premier Document and $300,000 in cash for PDM.
An amount equal to $200,000 in cash will be retained by the Company
for a period of 120 days from the date of closing as security and
as an offset for any breach of the Premier Agreement by Premier
Document, PDM or the Premier Stockholders. The Common Stock issued
in the Premier Acquisition will be restricted as to resale for two
years. The Company will make an additional lump-sum, cash and
stock earn-out payment on March 1, 1997 to the Premier
Stockholders, up to a maximum earnout amount of $6,000,000, to the
extent that earnings before interest, taxes, depreciation and
amortization of Premier Document and PDM for the eight month period
ending December 31, 1996 exceeds $406,000 on March 1, 1997.
The primary source of the cash portion of the purchase price used
in the Premier Acquisition was the Company's working capital.
The description of the foregoing acquisition agreements are
qualified in their entirety by reference to the copy of such
agreements filed as exhibits to this Form 8-K.
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The Company is not aware of any material relationships that
existed prior to the B&B Acquisition and the Premier Acquisition
(collectively referred to as the "Acquired Businesses"), between
the Company, its officers and directors, on the one hand, and the
Acquired Businesses and their shareholders, on the other.
The assets of the Acquired Businesses include inventory, equipment
and other real and personal property. The Company intends to
continue the utilization of these assets in a manner consistent
with that of their historical usage, providing document management
services, including electronic imaging, micrographics and
publishing services and medical records releases services to its
customers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
The Company believes that it is impractical to provide financial
statements of the Acquired Businesses on the date of this filing,
and will, if required, file such financial statements when
available, but not later than sixty (60) days after the date on
which this current report on Form 8-K must be filed.
(b) Pro Forma Financial Information.
The Company believes that it is impractical to provide the pro
forma financial statements of the Company on the date of this
filing, and will, if required, file such financial statements when
available, but not later than sixty (60) days after the date on
which this current report on Form 8-K must be filed.
(c) Exhibits
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10.17 Agreement and Plan of Reorganization, dated as of May 31,
1996, by and among F.Y.I. Incorporated, B&B (Baltimore-
Washington) Acquisition Corp., B&B Information and Image
Management, Inc. and Charles J. Bauer, Jr.
10.18 Agreement and Plan of Reorganization, dated as of May 31,
1996, by and among F.Y.I. Incorporated, Premier
Acquisition Corp., Premier Document Management, Inc.,
PDM Services, Inc., Brian E. Whiteside, Christopher S.
Moore, Lynnette C. Pomerville and Gary T. Siervert.
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: June 14, 1996
F.Y.I. INCORPORATED
By: /s/ Ed H. Bowman, Jr.
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Ed H. Bowman, Jr.
President and Chief Executive Officer
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EXHIBIT INDEX
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Exhibit Description
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10.17 Agreement and Plan of Reorganization, dated as of May 31, 1996, by
and among F.Y.I. Incorporated, B&B (Baltimore-Washington) Acquisition
Corp., B&B Information and Image Management, Inc. and Charles J.
Bauer, Jr.
10.18 Agreement and Plan of Reorganization, dated as of May 31, 1996, by
and among F.Y.I. Incorporated, Premier Acquisition Corp., Premier
Document Management, Inc., PDM Services, Inc., Brian E. Whiteside,
Christopher S. Moore, Lynnette C. Pomerville and Gary T. Siervert.
</TABLE>
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EXHIBIT 10.17
_________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 31st day of May, 1996
by and among
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
and
the STOCKHOLDER named herein
_________________________________________________________________
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1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Delivery and Filing of Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Certificate of Incorporation, By-laws and Board of
Directors of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Certain Information With Respect to the Capital
Stock of the Company, FYI and Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. CONVERSION OF STOCK; ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Manner of Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Calculation of FYI Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Earnings Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Accumulated Adjustments Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. DELIVERY OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Delivery Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Delivery by the Stockholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(A) Representations and Warranties of the Company and the
Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Organization, Existence and Good Standing of the Company . . . . . . . . . . . . . . . . . 6
5.3 Capital Stock of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.4 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.6 Accounts and Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 Permits and Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.9 Assets and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.10 Real Property Leases; Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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5.11 Environmental Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.13 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.14 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.15 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.16 Litigation and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.18 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.20 Employees; Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.22 Interests in Customers, Suppliers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.23 Business Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.24 Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.25 Bank Accounts and Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.26 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.27 Warranty Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(B) Representations and Warranties of the Stockholder . . . . . . . . . . . . . . . . . . . . . 18
5.28 Authority; Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.29 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.30 No Intention to Dispose of FYI Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.31 Validity of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.32 S Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. REPRESENTATIONS OF FYI AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 FYI Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Validity of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Capitalization of FYI and Ownership of FYI . . . . . . . . . . . . . . . . . . . . . . . . 20
6.7 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Business; Real Property; Material Agreements; Financial
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Conformity with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.11 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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6.13 Litigation Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.14 Antitrust Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.15 Generally Accepted Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
STOCKHOLDER AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Representations and Warranties; Performance of Obligations . . . . . . . . . . . . . . . . 24
7.2 Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.8 Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.9 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.10 Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.11 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF FYI AND
NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.1 Representations and Warranties; Performance of Obligations . . . . . . . . . . . . . . . . 25
8.2 Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.3 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.4 Examination of Final Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.5 Repayment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.7 Stockholder Release; Amendment of Employment Agreement . . . . . . . . . . . . . . . . . . 26
8.8 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.9 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.10 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.11 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.12 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.13 Lock-Up Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.15 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.16 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. COVENANTS AFTER CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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9.1 Preservation of Tax and Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Preparation and Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Covenants Concerning Termination of S Election . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Continuation of Employee Bonus Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 Minutes of FYI Board of Director's Meetings . . . . . . . . . . . . . . . . . . . . . . . . 31
10. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 FYI Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.3 Employee Compensation and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.4 Stockholder Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.5 Indemnification for Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.6 Notice of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.7 Right to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.8 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.9 Satisfaction of Claims From Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.10 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.11 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11. SECURITIES ACT REPRESENTATIONS AND TRANSFER
RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.1 Economic Risk; Sophistication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.2 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.2 Survival of Covenants, Agreements, Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.6 Brokers and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.10 Exercise of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.11 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.12 Reformation and Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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<TABLE>
<S> <C> <C>
12.13 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.14 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.15 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<PAGE> 7
SCHEDULES AND ANNEXES
<TABLE>
<CAPTION>
SCHEDULES
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<S> <C>
1.3(d) Officers of the Surviving Corporation
5.2 Jurisdictions of Qualification and Company Charter Documents
5.3 Capital Stock of the Company
5.5 Financial Statements and Contingent Liabilities
5.6 Accounts and Notes Receivable
5.7 Permits and Licenses
5.8 Taxes
5.9 Assets and Properties
5.10 Real Property Leases
5.11 Environmental Matters
5.12 Contracts
5.14 Government Contracts
5.16 Litigation
5.18 Intellectual Property Rights
5.19 Employee Benefit Plans
5.20 Employee Matters
5.21 Insurance
5.23 Business Relations
5.24 Officers and Directors
5.25 Bank Accounts
5.26 Absence of Certain Changes
5.28 Liens on Company Stock
6.6 FYI Capital Stock
6.8 FYI Subsidiaries
6.9 FYI Financial Information
6.10 FYI Compliance with Laws
6.11 No Violations by FYI
6.13 FYI Litigation
8.6 Continuing Obligations
8.7 Continuing Related Party Agreements
ANNEXES
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I Aggregate Consideration to be paid to the Stockholder
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
II FYI Charter Documents
III Opinion of Counsel to FYI
IV Employment Agreement
V Escrow Agreement
VI Stockholder Release
VII Opinion of Counsel to the Company
VIII Noncompetition Agreement
IX Lock-Up Agreement
</TABLE>
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<PAGE> 9
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 31st day of May, 1996, by and among F.Y.I. INCORPORATED, a
Delaware corporation ("FYI"), B&B (BALTIMORE-WASHINGTON) ACQUISITION
CORP., a Delaware corporation ("Newco"), B&B INFORMATION AND IMAGE
MANAGEMENT, INC., a Maryland close corporation (the "COMPANY"), and
CHARLES J. BAUER, JR. (the "Stockholder").
WHEREAS, Newco is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on May 17,
1996, solely for the purpose of completing the transactions set forth
herein, and is a wholly-owned subsidiary of FYI, a corporation organized
and existing under the laws of the State of Delaware;
WHEREAS, the respective Boards of Directors of Newco and the
Company (which together are hereinafter collectively referred to as
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that the
Company merge with and into Newco pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware, such
transaction sometimes being herein called the "Merger";
WHEREAS, the Boards of Directors of FYI, Newco and the Company
have approved and adopted this Agreement and intend this transaction to
qualify as a partially tax-free transfer of property under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the "Code");
NOW, THEREFORE, for and in consideration of the premises and of
the mutual agreements, representations, warranties, provisions and
covenants herein contained, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The
Constituent Corporations will cause Articles of Merger with respect to the
Merger (the "Articles of Merger") to be signed, verified and delivered to
the Secretary of State of the State of Delaware and, if required, a
similar filing to be made with the relevant authorities in the State of
Maryland, on or before the Closing Date (as defined in Section 4).
<PAGE> 10
1.2 EFFECTIVE TIME OF THE MERGER. The "Effective Time of the
Merger" shall be the Closing Date as defined in Section 4. At the
Effective Time of the Merger, the Company shall be merged with and into
Newco in accordance with the Articles of Merger, the separate existence of
the Company shall cease and the corporate name of Newco shall be B&B
Acquisition (Baltimore-Washington) Corp. Newco shall be the surviving
party in the Merger and is hereinafter sometimes referred to as the
"Surviving Corporation." The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF
DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger:
(a) The Certificate of Incorporation of Newco then in
effect shall become the Certificate of Incorporation of the
Surviving Corporation; and subsequent to the Effective Time of the
Merger, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation until changed as
provided by law;
(b) The By-laws of Newco then in effect shall become
the By-laws of the Surviving Corporation; and subsequent to the
Effective Time of the Merger, such By-laws shall be the By-laws of
the Surviving Corporation until they shall thereafter be duly
amended;
(c) The Board of Directors of the Surviving
Corporation shall consist of the following persons:
Thomas C. Walker
David Lowenstein
The Board of Directors of the Surviving Corporation shall hold
office subject to the provisions of the laws of the State of
Delaware and of the Certificate of Incorporation and By-laws of
the Surviving Corporation.
(d) The officers of the Surviving Corporation shall
be the persons set forth on Schedule 1.3(d) hereto, each of such
officers to serve, subject to the provisions of the Certificate of
Incorporation and By-laws of the Surviving Corporation and the
terms of any employment agreement executed by any such officer,
until such officer's successor is duly elected and qualified.
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<PAGE> 11
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF
THE COMPANY, FYI AND NEWCO. The respective designations and numbers of
outstanding shares and voting rights of each class of outstanding capital
stock of the Company, FYI and Newco as of the date of this Agreement are as
follows:
(a) As of the date of this Agreement, the authorized
capital stock of the Company consists of one hundred (100) shares
of Common Stock, par value $10.00 per share ("Company Stock"), of
which one hundred (100) shares are issued and outstanding;
(b) As of the date of this Agreement, the authorized
capital stock of FYI consists of twenty six million (26,000,000)
shares of Common Stock, $.01 par value per share ("FYI Stock"), of
which five million two hundred sixty-nine thousand six hundred and
fifteen (5,269,615) shares are issued and outstanding, and one
million (1,000,000) shares of Preferred Stock, $.01 par value per
share, of which no shares are issued and outstanding; and
(c) As of the date of this Agreement, the authorized
capital stock of Newco consists of 3,000 shares of Common Stock,
$.01 par value per share ("Newco Stock"), of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger,
the effect of the Merger shall be as provided in the applicable provisions
of the General Corporation Law of the State of Delaware (the "Delaware
GCL"). Except as herein specifically set forth, the identity, existence,
purposes, powers, objects, franchises, privileges, rights and immunities
of the Company shall continue unaffected and unimpaired by the Merger and
the corporate franchises, existence and rights of the Company shall be
merged with and into Newco, and Newco, as the Surviving Corporation, shall
be fully vested therewith. At the Effective Time of the Merger, the
separate existence of the Company shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts
due on whatever account, including subscriptions to shares, all taxes,
including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to the
Company and Newco shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every
other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were
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<PAGE> 12
of the Company and Newco; and the title to any real estate, or interest
therein, whether by deed or otherwise, under the laws of the state of
incorporation vested in the Company and Newco, shall not revert or be in
any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the Company and Newco
and any claim existing, or action or proceeding pending, by or against the
Company or Newco may be prosecuted as if the Merger had not taken place,
or the Surviving Corporation may be substituted in their place. Neither
the rights of creditors nor any liens upon the property of the Company or
Newco shall be impaired by the Merger, and all debts, liabilities and
duties of the Company and Newco shall attach to the Surviving Corporation,
and may be enforced against such Surviving Corporation to the same extent
as if said debts, liabilities and duties had been incurred or contracted
by such Surviving Corporation.
2. CONVERSION OF STOCK; ADJUSTMENT
2.1 MANNER OF CONVERSION. The manner of converting the
shares of (a) Company Stock and (b) Newco Stock, issued and outstanding
immediately prior to the Effective Time of the Merger, respectively, into
(i) FYI Stock and (ii) shares of Common Stock, $.01 par value per share,
of the Surviving Corporation, shall be as follows:
As of the Effective Time of the Merger:
(a) All of the shares of Company Stock issued and
outstanding immediately prior to the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the
holder thereof, automatically shall be deemed to represent (i)
that number of shares of FYI Stock determined pursuant to Section
2.2 below and (ii) the right to receive the amount of cash
determined pursuant to Section 2.2 below, such shares and cash to
be distributed to the Stockholder as provided in Annex I hereto;
(b) All shares of Company Stock that are held by the
Company as treasury stock (as defined in Section 5) shall be
cancelled and retired and no shares of FYI Stock or other
consideration shall be delivered or paid in exchange therefor; and
(c) Each share of Newco Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger and without any action on the part of FYI,
automatically be converted into one fully
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<PAGE> 13
paid and non-assessable share of Common Stock of the Surviving
Corporation that shall constitute all of the issued and
outstanding shares of Common Stock of the Surviving Corporation
immediately after the Effective Time of the Merger.
All FYI Stock received by the Stockholder as of the Effective Time
of the Merger shall, except for restrictions on resale or transfer
described in Section 11.2 hereof, have the same rights as all the other
shares of outstanding FYI Stock. All voting rights of such FYI Stock
received by the Stockholder shall be fully exercisable by the Stockholder
and the Stockholder shall not be deprived nor restricted in exercising
those rights. At the Effective Time of the Merger, FYI shall have no
class of capital stock issued and outstanding which, as a class, shall
have any rights or preferences senior to the shares of FYI Stock received
by the Stockholder, including, without limitation, any rights or
preferences as to dividends or as to the assets of FYI upon liquidation or
dissolution or as to voting rights.
2.2 CALCULATION OF FYI SHARES. All Company Stock shall be
converted, as a result of the Merger, into the number of shares of FYI
Stock and the amount of cash set forth in Annex I attached hereto.
2.3 EARNINGS ADJUSTMENT. All earnings and cash flow of the
Company for the period from and after the close of business on April 30,
1996 (the "Effective Date") through the Effective Time of the Merger shall
be for the benefit of Newco and shall be conveyed to Newco at the Closing
pursuant to the Merger of the Company into Newco. Prior to the time of
the Closing, the Stockholder shall have received as a distribution from
the Company the sum of $236,683, such sum representing the best estimate
of the Stockholder and the Company of the amount of 1996 earnings of the
Company prior to April 30, 1996. Following the Closing and prior to June
30, 1996, the Stockholder and the Surviving Corporation shall ascertain
the actual 1996 earnings of the Company prior to April 30, 1996. To the
extent that actual 1996 earnings of the Company prior to April 30, 1996
are less than $236,683, FYI shall be entitled to a dollar for dollar
reimbursement from the Stockholder in the amount of such shortfall, which
shall be paid by the Stockholder within thirty (30) days after such
shortfall is determined by the parties hereto. To the extent that actual
1996 earnings of the Company prior to April 30, 1996 are in excess of
$236,683, the Stockholder shall be entitled to a dollar for dollar
reimbursement from FYI in the amount of such surplus, which shall be paid
by the Company within thirty (30) days after such surplus is determined by
the parties hereto; provided, that in no event will the surplus paid to
the Stockholder pursuant to this sentence be more than $150,000. Any such
dividend shall be payable solely from earnings of the
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<PAGE> 14
Company. In no event will FYI directly or indirectly supply the funds
used to pay such dividend.
2.4 ACCUMULATED ADJUSTMENTS ACCOUNT. Immediately prior to
the Effective Time of the Merger, the Company shall distribute to the
Stockholder an amount equal to $252,927, which amount constitutes the
Company's Accumulated Adjustments Account as defined in Section 1368(e) of
the Code.
3. DELIVERY OF SHARES
3.1 DELIVERY PROCEDURE. At or after the Effective Time
of the Merger and at the Closing the Stockholder, as the holder of all
outstanding certificates representing shares of Company Stock, shall, upon
surrender of such certificates, be entitled to receive the number of
shares of FYI Stock and the amount of cash calculated pursuant to Section
2.2 above less FYI Stock valued at $250,000 to be delivered to the Escrow
Agent to be held thereby in accordance with the terms of the Escrow
Agreement (each as defined below in Section 7).
3.2 DELIVERY BY THE STOCKHOLDER. The Stockholder shall
deliver to FYI at Closing (as defined below in Section 4) the certificates
representing Company Stock, duly endorsed in blank by the Stockholder, or
accompanied by blank stock powers, with signatures guaranteed by a
national or state chartered bank, and with all necessary transfer tax and
other revenue stamps, acquired at the Stockholder's expense, affixed and
cancelled. The Stockholder agrees promptly to cure any deficiencies with
respect to the endorsement of the certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
On the Closing Date (as defined below), the parties shall take all
actions necessary (i) to effect the Merger (including, if permitted by
applicable state law, the filing with the appropriate state authorities of
the Articles of Merger) and (ii) to effect the conversion and delivery of
shares referred to in Section 3 hereof (hereinafter referred to as the
"Closing"). The Closing shall take place at the offices of Locke Purnell
Rain Harrell (A Professional Corporation), 2200 Ross Avenue, Suite 2200,
Dallas, Texas 75201. The date on which the Closing shall occur shall be
referred to as the "Closing Date." On the Closing Date, the Articles of
Merger shall be filed with the appropriate state authorities, or if
already filed shall become effective, and all transactions contemplated by
this Agreement,
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<PAGE> 15
including the conversion and delivery of shares, the delivery by wire
transfer or by a certified check or checks in an amount equal to the cash
portion of the consideration that the Stockholder shall be entitled to
receive pursuant to the Merger referred to in Section 2 hereof, shall
occur and be deemed to be completed. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDER
Each of the Company and the Stockholder jointly and severally
represent and warrant that all of the following representations and
warranties in this Section 5(A) are true at the date of this Agreement and
at the time of the Closing.
5.1 AUTHORIZATION. This Agreement has been duly executed and
delivered by each of the Stockholder and the Company and constitutes the
valid and binding obligation of each such party, enforceable in accordance
with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, (ii) the remedy of specific
performance and injunctive relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings
may be brought and (iii) rights to indemnification hereunder may be
limited under applicable securities laws. The Company has full corporate
power, capacity and authority to execute this Agreement and the Articles
of Merger and all other agreements and documents contemplated hereby.
5.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF THE COMPANY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation with all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The
Company is duly qualified or licensed as a foreign corporation and in good
standing in each jurisdiction in which the character or location of the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the
failure to be so duly qualified or licensed would not have a material
adverse effect on the business, financial condition, results of operations
or prospects of the Company. Set forth on Schedule 5.2 is a list of the
jurisdictions in which the Company is qualified or licensed to do business
as a foreign corporation. True, complete and correct copies of the
Articles of Incorporation (as of the date hereof, certified by an officer
of the Company and by the Secretary of State or other appropriate
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<PAGE> 16
authority of the applicable states of incorporation) and By-laws (as of
the date hereof, certified by an officer of the Company), of the Company
are attached hereto on Schedule 5.2. Except as set forth on Schedule 5.2,
the minute books of the Company, as heretofore made available to FYI, are
correct and complete in all material respects.
5.3 CAPITAL STOCK OF THE COMPANY.
(a) The Company's authorized capital stock is as set
forth in Section 1.4(a). All of the Company Stock has been
validly issued and is fully paid and nonassessable and no holder
thereof is entitled to any preemptive rights. There are no
outstanding conversion or exchange rights, subscriptions, options,
warrants or other arrangements or commitments obligating the
Company to issue any shares of capital stock or other securities
or to purchase, redeem or otherwise acquire any shares of capital
stock or other securities, or to pay any dividend or make any
distribution in respect thereof.
(b) The Stockholder (i) owns of record and
beneficially and has good and marketable title to all of the
issued and outstanding shares of the Company Stock, free and clear
of any and all liens, mortgages, security interests, encumbrances,
pledges, charges, adverse claims, options, rights or restrictions
of any character whatsoever (collectively, "Liens"), and (ii) has
the right to vote the Company Stock on any matters as to which any
shares of the Company Common Stock are entitled to be voted under
the laws of the state of the Company's incorporation and the
Company's Certificate of Incorporation and By-laws, free of any
right of any other person.
5.4 NO SUBSIDIARIES. The Company does not presently own, of
record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is the
Company, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.5 FINANCIAL STATEMENTS.
(a) The Company has previously furnished to FYI and
Newco the audited balance sheet of the Company as of December 31,
1995 and the related statements of operations, stockholder's
equity and cash flows for the three fiscal years then ended,
together with the report thereon by C.W. Amos & Company,
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<PAGE> 17
independent public accountants, and the footnotes thereto,
together with the statements of operations, stockholder's equity
and cash flows for the four-month period ended April 30, 1996
(collectively, the "Financial Statements"). The Financial
Statements present fairly the financial position and results of
operations of the Company as of the indicated dates and for the
indicated periods, and other than the financial statements for the
four-month period ended April 30, 1996 (which do not contain
year-end accruals or footnotes), have been prepared in accordance
with generally accepted accounting principles consistently applied
("GAAP"). To the extent requested, the Company has previously
permitted FYI and Newco full access to papers pertaining to the
Financial Statements, including those work papers in the
possession of or prepared by C.W. Amos & Company.
(b) Except to the extent (and not in excess of the
amounts) reflected in the December 31, 1995 balance sheet included
in the Financial Statements or as disclosed on Schedule 5.5, the
Company has no known liabilities or obligations (including,
without limitation, Taxes (as defined in Section 5.8) payable and
deferred Taxes and interest accrued since December 31, 1995)
required to be reflected in the Financial Statements (or the notes
thereto) in accordance with GAAP other than current liabilities
incurred in the ordinary course of business, consistent with past
practice, subsequent to April 30, 1996. The Company has also
delivered to FYI on Schedule 5.5, in the case of those liabilities
that are contingent, a reasonable estimate of the maximum amount
that may be payable. For each such contingent liability, the
Company has provided to FYI the following information:
(i) A summary description of the liability
together with the following:
(A) Copies of all relevant
documentation relating thereto;
(B) Amounts claimed and any other
action or relief sought; and
(C) Name of claimant and all other
parties to the claim, suit or proceeding.
(ii) The name of each court or agency before
which such claim, suit or proceeding is pending; and
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<PAGE> 18
(iii) The date such claim, suit or proceeding
was instituted.
5.6 ACCOUNTS AND NOTES RECEIVABLE. Set forth on Schedule 5.6
is an accurate list of the accounts and notes receivable of the Company as
of April 30, 1996, including any such amounts that are not reflected in
the balance sheet as of April 30, 1996 included within the Financial
Statements, and including receivables from and advances to employees and
the Stockholder. The Company shall provide FYI with an aging of all
accounts and notes receivable showing amounts due in 30-day aging
categories. Amounts reserved on the Financial Statements for
uncollectible accounts and notes receivable are reasonable and adequate.
5.7 PERMITS AND INTANGIBLES. The Company owns or holds all
licenses, franchises, permits and other governmental authorizations,
including permits, titles (including motor vehicle titles and current
registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights, the
absence of any of which would have a material adverse effect on the
business, operations, properties, assets or condition (financial or
otherwise) of the Company taken as a whole (a "Material Adverse Effect").
The Company has delivered to FYI an accurate list and summary description
as Schedule 5.7 hereto of all such licenses, franchises, permits and other
governmental authorizations. To the knowledge of the Company and the
Stockholder, the licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.7 are valid, and the Company has not
received any notice that any governmental authority intends to cancel,
terminate or not renew any such license, franchise, permit or other
governmental authorization. To the knowledge of the Company and the
Stockholder, the Company has conducted and is conducting its business in
compliance in all material respects with the requirements, standards,
criteria and conditions set forth in applicable permits, licenses, orders,
approvals, variances, rules and regulations, and is not in violation of
any of the foregoing except where such noncompliance or violation would
not have a Material Adverse Effect. Except as specifically provided on
Schedule 5.7, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or materially
adversely affect the rights and benefits afforded to the Company by, any
such licenses, franchises, permits and governmental authorizations.
5.8 TAX MATTERS.
(a) Except as set forth on Schedule 5.8, the Company
has filed all income tax returns required to be filed by thereby and all
returns of other Taxes (as
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<PAGE> 19
defined below) required to be filed thereby and have paid or provided for
all Taxes required to be paid in respect of periods for which such returns
were due and has established an adequate accrual or reserve for the
payment of Taxes required to be paid in respect of the period subsequent
to the last of said periods required to be so accrued or reserved up to
and including the Closing Date. Except as set forth on Schedule 5.8, (i)
no action or proceeding for the assessment or collection of any Taxes is
pending against the Company; (ii) no deficiency, assessment or other
formal claim for any Taxes has been asserted or made against the Company
that has not been fully paid or finally settled; and (iii) no issue has
been formally raised by any taxing authority in connection with an audit
or examination of any return of Taxes. No federal, state or foreign
income tax returns of the Company have been examined, and there are no
outstanding agreements or waivers extending the applicable statutory
periods of limitation for such Taxes for any period. Except as set forth
on Schedule 5.8, all Taxes that the Company has been required to collect
or withhold have been duly withheld or collected and, to the extent
required, have been paid to the proper taxing authority. For purposes of
this Agreement, "Taxes" shall mean all taxes, charges, fees, levies or
other assessments including, without limitation, income, excise, property,
withholding, sales and franchise taxes, imposed by the United States, or
any state, county, local or foreign government or subdivision or agency
thereof, and including any interest, penalties or additions attributable
thereto.
(b) The Company is not a party to any Tax allocation
or sharing agreement.
(c) None of the assets of the Company constitutes
tax-exempt bond financed property or tax- exempt use property, within the
meaning of Section 168 of the Code, except as set forth on Schedule 5.8.
No Acquired Party is a party to any "safe harbor lease" that is subject to
the provisions of Section 168(f)(8) of the Code as in effect prior to the
Tax Reform Act of 1986, or to any "long-term contract" within the meaning
of Section 460 of the Code.
(d) At the Closing Date, the Company will hold at
least ninety percent (90%) of the fair market value of its net assets and
at least seventy percent (70%) of the fair market value of its gross
assets held immediately prior to the Closing Date. For purposes of making
this representation, amounts paid by the Company to pay reorganization
expenses, and all redemptions and distributions in anticipation of or as
part of the plan of reorganization by the Company, including, but not
limited to the distributions pursuant to Sections 2.3 and 2.4 hereof, will
be included as assets of the Company immediately prior to the Merger.
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<PAGE> 20
(e) At the Closing Date, the Company will not have
outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in the
Company that, if exercised or converted, would affect FYI's acquisition or
retention of ownership of more than eighty percent (80%) of the total
combined voting power of all classes of Company stock and more than eighty
percent (80%) of the total number of shares of each class of Company
non-voting stock. The Company has no plan or intention to issue
additional shares of its stock that would result in FYI losing control of
the Surviving Corporation within the meaning of Section 368(c) of the
Code.
(f) The liabilities of the Company to be assumed by
Newco and the liabilities to which the transferred assets are subject were
incurred by the Company in the ordinary course of its trade or business.
(g) There is no plan or intention by the Stockholder
to sell, exchange, or otherwise dispose of any of the shares of FYI Stock
received in the Merger. For purposes of this representation, shares of
Company Stock exchanged for cash or other property and shares of Company
Stock exchanged for cash in lieu of fractional shares of FYI Stock will be
treated as outstanding Company Stock on the date of the transaction.
Moreover, shares of Company Stock and shares of FYI stock held by the
Stockholder and otherwise sold, redeemed, or disposed of prior to or
subsequent to the Closing Date will be considered in making this
representation. In addition, there is no plan or intention by the
Stockholder to sell, exchange or otherwise dispose of FYI Stock, if any,
received by the Stockholder pursuant to Section 10.11.
(h) The Company and the Stockholder will each pay
their respective expenses, if any, incurred in connection with the Merger.
(i) The Company qualifies as an S corporation within
the meaning of Subchapter S of the Code.
5.9 ASSETS AND PROPERTIES.
(a) Real Property. Schedule 5.9 contains a list of
all real properties owned by the Company (the "Real Property"). Except as
set forth on Schedule 5.9, the Company has good and marketable fee simple
title to all Real Property and none of the Real Property is subject to any
Lien, except as set forth in the title policy set forth on Schedule 5.9.
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(b) Personal Property. Except as set forth on
Schedule 5.9 and except for inventory and supplies disposed of or
consumed, and accounts receivable collected or written off, and cash
utilized, all in the ordinary course of business consistent with past
practice, the Company owns all of its inventory, equipment and other
personal property (both tangible and intangible) reflected on the latest
balance sheet included in the Financial Statements or acquired since
December 31, 1995, to the knowledge of the Company and the Stockholder,
free and clear of any Liens, except for statutory Liens for current taxes,
assessments or governmental charges or levies on property not yet due and
payable.
(c) Condition of Properties. Except as set forth on
Schedule 5.9, the Real Property and all improvements thereto, to the
knowledge of the Company and the Stockholder, the leasehold estates the
subject of the Real Property Leases (as defined in Section 5.10) and the
tangible personal property owned or leased by the Company are in good
operating condition and repair, ordinary wear and tear excepted; and
neither the Company nor the Stockholder has any knowledge of any condition
not disclosed herein of the Real Property, the improvements thereto or any
such leasehold estate that is reasonably likely to materially affect the
fair market value, use or operation of the Real Property, such
improvements or any leasehold estate or otherwise have a Material Adverse
Effect.
(d) Compliance. To the knowledge of the Company and
the Stockholder, the ownership, operation, use and occupancy of the Real
Property, the improvements thereto and the leasehold estates the subject
of the Real Property Leases as currently operated, used and occupied are
in material compliance with all applicable zoning, building, health, flood
control, fire or other laws, ordinances, orders or regulations or any
restrictive covenants. To the knowledge of the Company and the
Stockholder, there are no material violations of any federal, state,
county or municipal law, ordinance, order, regulation or requirement
affecting any portion of the Real Property, any improvements thereto or
the leasehold estates and no written notice of any such violation has been
issued by any governmental authority.
5.10 REAL PROPERTY LEASES; OPTIONS. Schedule 5.10 sets forth
a list of (i) all leases and subleases under which the Company is lessor
or lessee or sublessor or sublessee of any real property, together with
all amendments, supplements, nondisturbance agreements, brokerage and
commission agreements and other agreements pertaining thereto ("Real
Property Leases"); (ii) all material options held by the Company or
contractual obligations on the part of the Company to purchase or acquire
any interest in real property; and (iii) all options granted by the
Company or contractual obligations on the part of the Company to sell or
dispose of any material interest in real property. Copies
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of all Real Property Leases and such options and contractual obligations
have been delivered to FYI and Newco. The Company has not assigned any
Real Property Leases or any such options or obligations. There are no
Liens on the interest of the Company in the Real Property Leases, subject
only to (i) Liens for taxes and assessments not yet due and payable and
(ii) those matters set forth on Schedule 5.10. The Real Property Leases
and options and contractual obligations listed on Schedule 5.10 are in
full force and effect and constitute binding obligations of the Company
and the other parties thereto, and (x) there are no defaults thereunder
and (y) no event has occurred that with notice, lapse of time or both
would constitute a default by the Company or, to the best knowledge of the
Company and the Stockholder, by any other party thereto.
5.11 ENVIRONMENTAL LAWS AND REGULATIONS. To the knowledge of
the Company and the Stockholder:
(a) (i) The ownership and operations of the
"Subject Property," as defined below, and any use, storage, treatment,
disposal, or transportation of "Hazardous Substances," as defined below,
that has occurred in or on the Subject Property prior to the date of this
Agreement have been in material compliance with "Environmental
Requirements," as defined below; (ii) during the ownership, occupancy and
operation of the Subject Property by the Company, or prior to its
ownership, occupancy or operation, no release, leak, discharge, spill,
disposal or emission of Hazardous Substances has occurred in, on or under
the Subject Property in a quantity or manner that violates or requires
remediation under Environmental Requirements; (iii) the Subject Property
is free of Hazardous Substances as of the date of this Agreement that
could reasonably be expected to have a Material Adverse Effect; (iv) there
is no pending or threatened litigation or administrative investigation or
proceeding concerning the Subject Property involving Hazardous Substances
or Environmental Requirements; (v) there is no ACM (as defined below),
within the Subject Property, whether friable or non-friable, and there are
no regulated above- ground or underground storage tank systems as defined
pursuant to applicable Environmental Requirements located at the Subject
Property; and (vi) the Company has never owned, operated, or leased any
real property other than the Subject Property except as set forth on
Schedule 5.11 hereto.
(b) Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Environmental Requirements" means all applicable laws,
statutes, rules, regulations, ordinances, judgments, decrees,
orders, agreements and other
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restrictions and requirements (whether now or hereafter in effect)
of any governmental authority, including, without limitation,
federal, state and local authorities, relating to the regulation
or protection of human health and safety, natural resources,
conservation, the environment, or the storage, treatment,
disposal, transportation, handling or other management of
industrial or solid waste, hazardous waste, hazardous or toxic
substances or chemicals, or pollutants.
"Hazardous Substance" means (i) any "hazardous substance"
as defined in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended from
time to time (42 U.S.C. Sections 9601 et seq.)("CERCLA") or any
regulations promulgated thereunder; (ii) petroleum and petroleum
by-products; (iii) material containing more than one percent (1%)
asbestos ("ACM"); or (iv) any additional substances or materials
that are currently defined as pollutants, hazardous or toxic under
Environmental Requirements.
"Subject Property" means the Real Property and all
property subject to the Real Property Leases.
5.12 CONTRACTS.
(a) Set forth on Schedule 5.12 is a list of all
contracts, agreements, arrangements and commitments (whether oral or
written) to which the Company is a party or by which its assets or
business are bound including, without limitation, contracts, agreements,
arrangements or commitments that relate to (i) the sale, lease or other
disposition by the Company of all or any substantial part of its business
or assets (otherwise than in the ordinary course of business), (ii) the
purchase or lease by the Company of a substantial amount of assets
(otherwise than in the ordinary course of business), (iii) the supply by
the Company of any customer's requirements for any item or the purchase by
the Company of its requirements for any item or of a vendor's output of
any item, (iv) lending or advancing funds by the Company, (v) borrowing of
funds or guaranteeing the borrowing of funds by any other person, whether
under an indenture, note, loan agreement or otherwise, (vi) any
transaction or matter with any affiliate of the Company, (vii)
noncompetition, (viii) licenses and grants to or from the Company relating
to any intangible property listed on Schedule 5.18, (ix) the acquisition
by the Company of any operating business or the capital stock of any
person since December 31, 1995, or (x) any other matter that is material
to the business, assets or operations of the Company, and excluding with
respect to clauses (i) through (iii) and clause (v) of this Section
5.12(a) contracts, agreements, arrangements or commitments (a) that may be
cancelled upon
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<PAGE> 24
thirty (30) days' notice or less by the Company without incurring any
Material Adverse Effect, or (B) involve or are reasonably expected to
involve the payment of consideration having an aggregate value of $50,000
or less during the fiscal year ending December 31, 1996 ("Contracts").
(b) Except as set forth on Schedule 5.12, each
Contract is in full force and effect on the date hereof, the Company has
not given or received notice of any default under any Contract, and, to
the knowledge of the Company and the Stockholder, neither the Company nor
any other party to any Contract is in default thereunder.
5.13 NO VIOLATIONS. A certified copy of the Articles of
Incorporation and a true, correct and complete copy of the By-laws, both
as amended to date, of the Company (the "Charter Documents") have been
delivered to FYI. The execution, delivery and performance of this
Agreement and the other agreements and documents contemplated hereby by
the Company and the Stockholder and the consummation of the transactions
contemplated hereby will not (i) violate any provision of any Charter
Document, (ii) violate any statute, rule, regulation, order or decree of
any public body or authority by which the Company or the Stockholder or
its or his respective properties or assets are bound, or (iii) result in a
violation or breach of, or constitute a default under, or result in the
creation of any encumbrance upon, or create any rights of termination,
cancellation or acceleration in any person with respect to any Contract or
any material license, franchise or permit of the Company or any other
agreement, contract, indenture, mortgage or instrument to which the
Company is a party or by which any of its properties or assets is bound,
except where such violation, breach, default or encumbrance, right of
termination, cancellation or acceleration would not have a Material
Adverse Effect.
5.14 GOVERNMENT CONTRACTS. Except as set forth on Schedule
5.14, the Company is not now a party to any governmental contracts subject
to price redetermination or renegotiation.
5.15 CONSENTS. Except as set forth on Schedule 5.15, no
consent, approval or other authorization of any governmental authority or
under any Contract or other agreement or commitment to which the Company
or the Stockholder is a party or by which its or his respective assets are
bound is required as a result of or in connection with the execution or
delivery of this Agreement and the other agreements and documents to be
executed by the Company and the Stockholder or the consummation by the
Company and the Stockholder of the transactions contemplated hereby,
except where the failure to obtain
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such consent, approval or authorization would not constitute a Material
Adverse Effect.
5.16 LITIGATION AND RELATED MATTERS. Set forth on Schedule
5.16 is a list of all actions, suits, proceedings, investigations or
grievances (of which the Company has received written notice) pending
against the Company or, to the knowledge of the Company and the
Stockholder, threatened against the Company, the business or any property
or rights of the Company, at law or in equity, before or by any court or
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign
("Agencies"). To the knowledge of the Company and the Stockholder, none
of the actions, suits, proceedings or investigations listed on Schedule
5.16 either (i) results or would, if adversely determined, have a Material
Adverse Effect or (ii) affects or would, if adversely determined, affect
the right or ability of the Company to carry on its business substantially
as now conducted. The Company is not subject to any written continuing
court or Agency order, writ, injunction or decree applicable specifically
to its business, operations or assets or its employees, nor in default
with respect to any order, writ, injunction or decree of any court or
Agency with respect to its assets, business, operations or employees.
Schedule 5.16 lists (x) all worker's compensation claims outstanding
against the Company as of the date hereof and (y) all actions, suits or
proceedings filed by or against the Company since December 31, 1995.
5.17 COMPLIANCE WITH LAWS. To the knowledge of the Company
and the Stockholder, the Company (a) is in compliance with all applicable
laws, regulations (including federal, state and local procurement
regulations), orders, judgments and decrees, and (b) possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business in the manner in which and in the jurisdictions and
places where such business is now conducted, except where the failure to
so comply would not have a Material Adverse Effect.
5.18 INTELLECTUAL PROPERTY RIGHTS. Schedule 5.18 lists the
domestic and foreign trade names, trademarks, service marks, trademark
registrations and applications, service mark registrations and
applications, patents, patent applications, patent licenses, software
licenses and copyright registrations and applications owned by the Company
or used thereby in the operation of its business (collectively, the
"Intellectual Property"), which Schedule indicates (i) the term and
exclusivity of its rights with respect to the Intellectual Property and
(ii) whether each item of Intellectual Property is owned or licensed by
the Company, and if licensed, the licensor and the license fees therefor.
Unless otherwise indicated on Schedule 5.18, the Company has the right to
use and license the Intellectual
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<PAGE> 26
Property, and the consummation of the transactions contemplated hereby
will not result in the loss or material impairment of any rights of the
Company in the Intellectual Property. Each item constituting part of the
Intellectual Property has been, to the extent indicated on Schedule 5.18,
registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office or such other government entity,
domestic or foreign, as is indicated on Schedule 5.18; all such
registrations, filings and issuances remain in full force and effect; and
all fees and other charges with respect thereto are current. Except as
stated on Schedule 5.18, to the knowledge of the Company and the
Stockholder, there are no pending proceedings or adverse claims made or,
to the knowledge of the Company and the Stockholder, threatened against
the Company with respect to the Intellectual Property; there has been no
litigation commenced or threatened in writing within the past five (5)
years with respect to the Intellectual Property or the rights of the
Company therein; and the Company and the Stockholder have no knowledge
that (i) the Intellectual Property or the use thereof by the Company
conflicts with any trade names, trademarks, service marks, trademark or
service mark registrations or applications, patents, patent applications,
patent licenses or copyright registrations or applications of others
("Third Party Intellectual Property"), or (ii) such Third Party
Intellectual Property or its use by others or any other conduct of a third
party conflicts with or infringes upon the Intellectual Property or its
use by the Company.
5.19 EMPLOYEE BENEFIT PLANS. Each employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained or contributed to
by the Company or any of its Group Members (as defined below)
(collectively, the "Plans") is listed on Schedule 5.19, is in substantial
compliance with applicable law and has been administered and operated in
all material respects in accordance with its terms. None of the Plans are
employee pension benefit plans within the meaning of Section 3(2) of
ERISA. No Plan is subject to Title IV of ERISA, and neither the Company
nor any Group Member has made any contributions to or participated in any
"multiple employer plan" (within the meaning of the Code or ERISA) or
"multi-employer plan" (as defined in Section 4001(a)(3) of ERISA). Full
payment has been made of all amounts that the Company were required under
the terms of the Plans to have paid as contributions to such Plans on or
prior to the date hereof (excluding any amounts not yet due) and all
amounts properly accrued to date as liabilities of the Company that have
not been paid have been properly recorded on the Financial Statements.
The Company and, to the knowledge of the Company and the Stockholder, no
other "disqualified person" or "party in interest" (within the meaning of
Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively)
has engaged in any transactions in connection with any Plan that could be
expected to result in the imposition
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of a material penalty pursuant to Section 502(i) of ERISA, damages
pursuant to Section 409 of ERISA or a tax pursuant to Section 4975(a) of
the Code. No material claim, action, proceeding, or litigation has been
made, commenced or, to the knowledge of the Company and the Stockholder,
threatened with respect to any Plan (other than for benefits payable in
the ordinary course). No Plan or related trust owns any securities in
violation of Section 407 of ERISA. Neither the Company nor any Group
Member has incurred any liability or taken any action, or has any
knowledge of any action or event, that could cause it to incur any
liability (i) under Section 4971 of the Code or Title IV of ERISA with
respect to any "single employer plan" (within the meaning of Section
4001(a)(15) of ERISA), (ii) on account of a partial or complete withdrawal
(within the meaning of Section 4205 and 4203 of ERISA, respectively) with
respect to any "multi-employer plan" (within the meaning of Section
4001(a)(3) of ERISA), (iii) on account of unpaid contributions to any such
multi-employer plan, or (iv) to provide health benefits or other
non-pension benefits to retired or former employees, except as
specifically required by Section 4980B(f) of the Code. Except as set
forth on Schedule 5.19, neither the execution and delivery of this
Agreement by the Company or the consummation of the transactions
contemplated hereby will (i) entitle any current or former employee of the
Company to severance pay, unemployment compensation or any similar
payment, (ii) accelerate the time of payment or vesting, or increase the
amount of, any compensation due to any such employee or former employee,
or (iii) directly or indirectly result in any payment made or to be made
to or on behalf of any person to constitute a "parachute payment" (within
the meaning of Section 280G of the Code). For purposes of this Agreement,
"Group Member" shall mean any member of any "affiliated service group" as
defined in Section 414(m) of the Code that, prior to the Closing Date,
includes the Company, any member of any "controlled group of corporations"
as defined in Section 1563 of the Code that, prior to the Closing Date,
includes the Company or any member of any group of "trades or businesses
under common control" as defined by Section 414(c) of the Code that, prior
to the Closing Date, includes the Company.
5.20 EMPLOYEES; EMPLOYEE RELATIONS.
(a) Schedule 5.20 sets forth (i) the name and current
annual salary (or rate of pay) and other compensation (including, without
limitation, normal bonus, profit-sharing and other compensation) now
payable by the Company to each employee whose current total annual
compensation or estimated compensation is $25,000 or more, (ii) any
increase to become effective after the date of this Agreement in the total
compensation or rate of total compensation payable by the Company to each
such person, (iii) any increase to become payable after the date of this
Agreement by the Company to employees other
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than those specified in clause (i) of this Section 5.20(a), (iv) all
presently outstanding loans and advances (other than routine travel
advances to be repaid or formally accounted for within sixty (60) days)
made by the Company to, or made to the Company by, any director, officer
or employee, (v) all other transactions between the Company and any
director, officer or employee thereof since April 30, 1996, and (vi) all
accrued but unpaid vacation pay owing to any officer or employee that is
not disclosed on the Financial Statements.
(b) Except as disclosed on Schedule 5.20, the Company
is not a party to, or bound by, the terms of any collective bargaining
agreement, and the Company has not experienced any labor difficulties of a
type reasonably likely to have a Material Adverse Effect during the last
five (5) years. Except as set forth on Schedule 5.20, there are no labor
disputes existing, or to the best knowledge of the Company and the
Stockholder, threatened involving, by way of example, strikes, work
stoppages, slowdowns, picketing, or any other interference with work or
production, or any other concerted action by employees. No charges or
proceedings before the National Labor Relations Board, or similar agency,
exist, or to the knowledge of the Company and the Stockholder, are
threatened.
(c) The relationships enjoyed by the Company with its
respective employees are generally good and the Company and the
Stockholder have no knowledge of any facts that would indicate that the
employees of the Company will not continue in the employ thereof following
the Closing on a basis similar to that existing on the date of this
Agreement. Except as disclosed on Schedule 5.20, the Company is not a
party to any employment contract with any individual or employee, either
express or implied, and there are no employee handbooks issued or adopted
by the Company. Except as disclosed on Schedule 5.20, to the knowledge of
the Company and the Stockholder, no legal proceedings, charges, complaints
or similar actions exist under any federal, state or local laws affecting
the employment relationship including, but not limited to: (i)
anti-discrimination statutes such as Title VII of the Civil Rights Act of
1964, as amended (or similar state or local laws prohibiting
discrimination because of race, sex, religion, national origin, age and
the like); (ii) the Fair Labor Standards Act or other federal, state or
local laws regulating hours of work, wages, overtime and other working
conditions; (iii) requirements imposed by federal, state or local
governmental contracts such as those imposed by Executive Order 11246;
(iv) state laws with respect to tortious employment conduct, such as
slander, false light, invasion of privacy, negligent hiring or retention,
intentional infliction of emotional distress, assault and battery, or loss
of consortium; or (v) the Occupational Safety and Health Act, as amended,
as well as any similar state laws,
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or other regulations respecting safety in the workplace; and to the best
knowledge of the Company and the Stockholder, no proceedings, charges, or
complaints are threatened under any such laws or regulations and no facts
or circumstances exist that would give rise to any such proceedings,
charges, complaints, or claims, whether valid or not. Except as disclosed
on Schedule 5.20, the Company is not subject to any settlement or consent
decree with any present or former employee, employee representative or any
government or Agency relating to claims of discrimination or other claims
in respect to employment practices and policies; and no government or
Agency has issued a judgment, order, decree or finding with respect to the
labor and employment practices (including practices relating to
discrimination) of the Company. Since December 31, 1994 the Company has
not incurred any liability or obligation under the Worker Adjustment and
Retraining Notification Act or similar state laws; and the Company has not
laid off more than ten percent (10%) of its employees at any single site
of employment in any ninety (90) day period during the twelve (12) month
period ending April 30, 1996.
5.21 INSURANCE. Schedule 5.21 contains an accurate list of
the policies and contracts (including insurer, named insured, type of
coverage, limits of insurance, required deductibles or co-payments, annual
premiums and expiration date) for fire, casualty, liability and other
forms of insurance maintained by, or for the benefit of, the Company.
Except as set forth in Schedule 5.21, all such policies are in full force
and effect and shall remain in full force and effect through the Closing
Date. Neither the Company nor the Stockholder has received any notice of
cancellation or non-renewal or of significant premium increases with
respect to any such policy. Except as disclosed on Schedule 5.21, no
pending claims made by or on behalf of the Company under such policies
have been denied or are being defended against third parties under a
reservation of rights by an insurer thereof. All premiums due prior to
the date hereof for periods prior to the date hereof with respect to such
policies have been timely paid.
5.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
described on Schedule 5.22, no stockholder, officer, director or affiliate
of the Company possesses, directly or indirectly, any financial interest
in, or is a director, officer, employee or affiliate of, any corporation,
firm, association or business organization that is a client, supplier,
customer, lessor, lessee or competitor of the Company. Ownership of
securities of a corporation whose securities are registered under the
Securities Exchange Act of 1934 not in excess of five percent (5%) of any
class of such securities shall not be deemed to be a financial interest
for purposes of this Section 5.22.
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5.23 BUSINESS RELATIONS. Schedule 5.23 contains an accurate
list of all significant customers of the Company (i.e., those customers
representing five percent (5%) or more of the Company's revenues for the
twelve (12) months ended December 31, 1995. Except as set forth on
Schedule 5.23, to the actual knowledge of the Company and the Stockholder,
no customer or supplier of the Company will cease to do business therewith
after the consummation of the transactions contemplated hereby, which
cessation would have a Material Adverse Effect. Except as set forth on
Schedule 5.23, since December 31, 1995, the Company has not experienced
any difficulties in obtaining any inventory items necessary to the
operation of its business, and, to the knowledge of the Company and the
Stockholder, no such shortage of supply of inventory items is threatened
or pending. The Company is not required to provide any bonding or other
financial security arrangements in any material amount in connection with
any transactions with any of its customers or suppliers.
5.24 OFFICERS AND DIRECTORS. Set forth on Schedule 5.24 is a
list of the current officers and directors of the Company.
5.25 BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 5.25 sets
forth each bank, savings institution and other financial institution with
which the Company has an account or safe deposit box and the names of all
persons authorized to draw thereon or to have access thereto. Each person
holding a power of attorney or similar grant of authority on behalf of the
Company is identified on Schedule 5.25. Except as disclosed on such
Schedule, the Company has not given any revocable or irrevocable powers of
attorney to any person, firm, corporation or organization relating to its
business for any purpose whatsoever.
5.26 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 5.26 or as otherwise contemplated by this Agreement,
since December 31, 1995, there has not been (a) any damage, destruction or
casualty loss to the physical properties of the Company (whether or not
covered by insurance), (b) any event or circumstance in the business,
operations, financial condition or results of operations or prospects of
the Company that would have a Material Adverse Effect, (c) any entry into
any transaction, commitment or agreement (including, without limitation,
any borrowing) material to the Company, except transactions, commitments
or agreements in the ordinary course of business consistent with past
practice, (d) any declaration, setting aside or payment of any dividend or
other distribution in cash, stock or property with respect to the capital
stock or other securities of the Company, any repurchase, redemption or
other acquisition by the Company of any capital stock or other securities,
or any agreement, arrangement or
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commitment by the Company to do so, (e) any increase that is material in
the compensation payable or to become payable by the Company to its
directors, officers, employee or agents or any increase in the rate or
terms of any bonus, pension or other employee benefit plan, payment or
arrangement made to, for or with any such directors, officers, employees
or agents, except as set forth on Schedule 5.26, (f) any sale, transfer or
other disposition of, or the creation of any Lien upon, any part of the
assets of the Company, tangible or intangible, except for sales of
inventory and use of supplies and collections of accounts receivables in
the ordinary course of business consistent with past practice, or any
cancellation or forgiveness of any debts or claims by the Company, (g) any
change in the relations of the Company with or loss of its customers or
suppliers, of any loss of business or increase in the cost of inventory
items or change in the terms offered to customers, which would have a
Material Adverse Effect, or (h) any capital expenditure (including any
capital leases) or commitment therefor by the Company in excess of
$10,000.
5.27 WARRANTY WORK. The Company does not expect to incur any
liability for warranty claims in excess of $50,000 in the twelve-month
period following the Closing.
(B) REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
The Stockholder represents and warrants that the representations
and warranties in this Section 5(B) are true as of the date of this
Agreement and at the time of the Closing.
5.28 AUTHORITY; OWNERSHIP. The Stockholder has the full legal
right, power and authority to enter into this Agreement. The Stockholder
owns beneficially and of record all of the shares of the Company Stock,
which constitutes all of the outstanding shares of capital stock of the
Company, and, except as set forth on Schedule 5.28 hereof, such Company
Stock is owned free and clear of all Liens. The Stockholder has owned the
Company Stock since 1992.
5.29 PREEMPTIVE RIGHTS. The Stockholder does not have, or
hereby waives, any preemptive or other right to acquire shares of Company
Stock or FYI Stock, that the Stockholder has or may have had other than
rights of the Stockholder to acquire FYI Stock pursuant to (i) this
Agreement or (ii) any option granted by FYI.
5.30 NO INTENTION TO DISPOSE OF FYI STOCK. There is no
current plan or intention by the Stockholder to sell, exchange or
otherwise dispose of any of the shares of the FYI Stock received in the
Merger. For purposes of this representation, shares of
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Company Stock exchanged for cash or other property and shares of Company
Stock exchanged for cash in lieu of fractional shares of FYI Stock will be
treated as outstanding Company Stock on the date of the transaction.
Moreover, shares of Company Stock and shares of FYI Stock held by the
Stockholder and otherwise sold, redeemed, or disposed of prior to or
subsequent to the Closing Date will be considered in making this
representation. In addition, there is no plan or intention by the
Stockholder to sell, exchange or otherwise dispose of FYI Stock, if any,
received by the Stockholder pursuant to Section 10.11.
5.31 VALIDITY OF OBLIGATIONS. The execution and delivery of
this Agreement, the Employment Agreement, the Noncompetition Agreement,
the Lock-Up Agreement and the Escrow Agreement (each as defined below) by
the Stockholder and the performance by the Stockholder of the transactions
contemplated herein or therein have been authorized by the Stockholder,
and this Agreement and the Employment Agreement, the Noncompetition
Agreement, the Lock-Up Agreement and the Escrow Agreement have each been
duly executed and delivered and are the legal, valid and binding
obligations of the Stockholder in accordance with their respective terms.
5.32 S CORPORATION. The Company made a valid election under
Section 1362(a) of the Code, effective January 1, 1992, to be taxed as an
S corporation under the Code. As of immediately prior to the Closing, the
Company qualifies as an S corporation within the meaning of Subchapter S
of the Code.
6. REPRESENTATIONS OF FYI AND NEWCO
FYI and Newco severally and jointly represent and warrant that all
of the following representations and warranties in this Section 6 are true
as of the date of this Agreement and shall be true at the time of Closing.
6.1 DUE ORGANIZATION. Each of FYI and Newco is duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and is duly authorized and qualified under all
applicable laws, regulations, and ordinances of public authorities to
carry on its businesses in the places and in the manner as now conducted
except for where the failure to be so authorized or qualified would not
have a material adverse effect on its business, operations, affairs,
properties, assets or condition (financial or otherwise).
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6.2 FYI STOCK. The FYI Stock to be delivered to the
Stockholder at the Closing Date shall constitute valid and legally issued
shares of FYI, fully paid and nonassessable, and except as set forth in
this Agreement, (a) will be owned free and clear of all Liens, and (b)
will be legally equivalent in all respects to the FYI Stock issued and
outstanding as of the date hereof. The shares of FYI Stock to be issued
to the Stockholder pursuant to this Agreement will be registered under the
Securities Act of 1933, as amended, (the "1933 Act").
6.3 VALIDITY OF OBLIGATIONS. The execution and delivery of
this Agreement, the Employment Agreement, the Noncompetition Agreement,
the Lock-Up Agreement and the Escrow Agreement by FYI and Newco and the
performance by each of FYI and Newco of the transactions contemplated
herein or therein have been or will be duly and validly authorized by the
respective Boards of Directors of FYI and Newco, and this Agreement and
the Employment Agreement, the Noncompetition Agreement, the Lock-Up
Agreement and the Escrow Agreement have each been duly and validly
authorized by all necessary corporate action, duly executed and delivered
and are the legal, valid and binding obligations of each of FYI and Newco,
enforceable against each of FYI and Newco in accordance with their
respective terms.
6.4 AUTHORIZATION. The representatives of FYI and Newco
executing this Agreement have the corporate authority to enter into and
bind FYI and Newco to the terms of this Agreement. FYI and Newco have the
full legal right, power and authority to enter into this Agreement and the
Merger.
6.5 NO CONFLICTS. The execution, delivery and performance of
this Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will
not:
(a) Conflict with, or result in a breach or violation
of Certificate of Incorporation or By- laws of either FYI or
Newco;
(b) Materially conflict with, or result in a material
default (or would constitute a default but for any requirement of
notice or lapse of time or both) under any document, agreement or
other instrument to which either FYI or Newco is a party, or
result in the creation or imposition of any lien, charge or
encumbrance on any of FYI's or Newco's properties pursuant to (i)
any law or regulation to which either FYI or Newco or any of their
respective property is
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subject, or (ii) any judgment, order or decree to which FYI or
Newco is bound or any of their respective property is subject; or
(c) Result in termination or any impairment of any
material permit, license, franchise, contractual right or other
authorization of FYI or Newco.
6.6 CAPITALIZATION OF FYI AND OWNERSHIP OF FYI STOCK. The
authorized and outstanding capital stock of FYI and Newco is as set forth
in Sections 1.4(b) and 1.4(c), respectively. All issued and outstanding
shares of FYI stock are duly authorized, validly issued, fully paid and
nonassessable. There are no obligations of FYI to repurchase, redeem or
otherwise acquire any shares of FYI capital stock. Except as set forth on
Schedule 6.6, there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which FYI is a party
or by which it is bound obligating FYI to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of FYI
or obligating FYI to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. All of the shares of FYI Stock to be issued to the Stockholder
in accordance herewith will be duly authorized, validly issued, fully paid
and nonassessable.
6.7 TRANSACTIONS IN CAPITAL STOCK. There has been no
transaction or action taken with respect to the equity ownership of FYI or
Newco in contemplation of the transactions described in this Agreement
that would prevent FYI from accounting for such transactions on a
reorganization accounting basis.
6.8 SUBSIDIARIES. Set forth on Schedule 6.8 hereto is a list
of the subsidiaries of FYI (each an "FYI Subsidiary" and collectively the
"FYI Subsidiaries"). Newco has no subsidiaries.
6.9 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS; FINANCIAL
INFORMATION. Attached hereto as Schedule 6.9 are FYI's audited historical
financial statements for the year ended December 31, 1995 and its
financial statements as filed on Form 10-Q with the Securities and
Exchange Commission for the quarter ended March 31, 1996. Such FYI
financial statements have been prepared in accordance with GAAP and
present fairly the financial position of FYI as of the indicated dates and
for the indicated periods. FYI has provided the Company and the
Stockholder with a true, complete and correct copy of its Registration
Statement on Form S-1 (Registration No. 33-98608 and Registration No.
333-1084) and Prospectus Supplement to Prospectus as filed with the
Securities and Exchange
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<PAGE> 35
Commission on May 17, 1996 and of all amendments thereto. Newco was
formed in May 1996, and has no historical financial statements or
information.
6.10 CONFORMITY WITH LAW. Neither FYI nor Newco is in
violation of any law or regulation or any order of any court or federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over either of them
that would have a material adverse effect on the business, operations,
affairs, properties, assets or condition (financial or otherwise) of FYI
and the FYI Subsidiaries taken as a whole (an "FYI Material Adverse
Effect"). Except as set forth on Schedule 6.10, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of FYI or
Newco, threatened, against or affecting FYI or Newco, at law or in equity,
or before or by any Agency having jurisdiction over either of them and no
notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. FYI (including the FYI Subsidiaries) has
conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations and is not in violation of any of the
foregoing that would have an FYI Material Adverse Effect.
6.11 NO VIOLATIONS. Copies of the Certificate of
Incorporation (as of the date hereof, certified by the Secretary or an
Assistant Secretary of each of FYI and Newco and by the Secretary of State
of the State of Delaware) and the By-laws (certified by the Secretary or
an Assistant Secretary of each of FYI and Newco), of FYI and Newco (the
"FYI Charter Documents") are attached hereto as Annex II; neither FYI nor
Newco is (a) in violation of any FYI Charter Document or (b) in default,
under any material lease, instrument, agreement, license, permit to which
it is a party or by which its properties are bound (the "FYI Material
Documents"); and, (i) the rights and benefits of FYI (including the FYI
Subsidiaries) under the FYI Material Documents will not be materially and
adversely affected by the transactions contemplated hereby and (ii) the
execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby
will not result in any material violation or breach or constitute a
default under, any of the terms or provisions of the FYI Material
Documents or the FYI Charter Documents. Except as set forth on Schedule
6.11, none of the FYI Material Documents requires notice to, or the
consent or approval of, any Agency or other third party to any of the
transactions contemplated hereby to remain in full force and effect or
give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. The minute books of FYI and of each FYI
Subsidiary as heretofore made available to the Company are true and
correct.
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<PAGE> 36
6.12 TAXES.
(a) FYI and Newco will each pay its respective
expenses, if any, incurred in connection with the Merger.
(b) Prior to the Merger, FYI will own all of the
outstanding stock of Newco. At all times prior to the Merger, no
person other than FYI has owned, or will own, any of the
outstanding stock of Newco.
(c) (i) Newco was formed by FYI solely for the
purpose of engaging in the transaction contemplated by the
Agreement.
(ii) There were not as of the date of the
Agreement and there will not be at the Closing Date, any
outstanding or authorized options, warrants, convertible
securities, calls, rights, commitments or any other agreements of
any character which Newco is a party to, or may be bound by,
requiring it to issue, transfer, sell, purchase, redeem or acquire
any shares of its capital stock or any securities or rights
convertible into, exchangeable for, evidencing the right to
subscribe for or acquire, any shares of its capital stock.
(iii) As of the date of this Agreement and the
Closing Date, except for obligations or liabilities incurred in
connection with (A) its incorporation or organization and (B) the
transactions contemplated thereby and in the Agreement, Newco has
not and will not have incurred, directly or indirectly through any
subsidiary, any obligations or liabilities or engaged in any
business or activities of any type or kind whatsoever or entered
into any agreement or arrangements with any person or entity.
(iv) Prior to the Closing Date, Newco did not
own any asset other than an amount of cash necessary to
incorporate Newco and to pay the expenses of the Merger
attributable to Newco and such assets as were necessary to perform
its obligations under this Agreement.
(v) FYI has no plan or intention to cause
the Surviving Corporation to issue additional shares of its stock
that would result in FYI losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code.
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(d) FYI has no plan or intention to reacquire any of
its stock issued in the Merger.
(e) FYI has no plan or intention to liquidate Newco
or merge Newco with or into another corporation (other than the
Company); sell or otherwise dispose of the stock of Newco; or
cause Newco or any of its subsidiaries to sell or otherwise
dispose of any of its assets or of any of the assets acquired from
the Company, other than as contemplated by this Agreement,
directly or indirectly, except for (i) dispositions made in the
ordinary course of business, (ii) transfers of assets to a
corporation all of whose outstanding stock is owned directly by
Newco or (iii) transfers of assets by direct or indirect
wholly-owned subsidiaries of Newco to other direct or indirect
wholly-owned subsidiaries of Newco.
(f) Any liabilities of the Company assumed by Newco
and any liabilities to which the transferred assets of the Company
are subject were incurred by the Company as described in Section
6.12(c)(iii).
(g) Based upon the accuracy of the representation in
Section 5.8(d), FYI has no current plan or intention to cause the
Company to hold less than ninety percent (90%) of the fair market
value of its net assets and seventy percent (70%) of the fair
market value of its gross assets immediately prior to the Closing
Date, with such amount determined based on the same methodology
described in Section 5.8(d).
6.13 LITIGATION MATTERS. Except as set forth in Schedule
6.13, there are no actions, suits, proceedings or investigations pending,
or to the knowledge of FYI or Newco, threatened in any court or before any
Agency or instrumentality against or by FYI or Newco, its stock, assets or
business that are reasonably likely to have an FYI Material Adverse
Effect. There are no actions, suits, proceedings or investigations
pending or, to the knowledge of FYI or Newco, threatened in any court or
before any Agency or instrumentality against or by FYI or Newco that would
prevent the consummation of the transactions contemplated herein.
6.14 ANTITRUST MATTERS. Neither FYI's nor Newco's annual net
sales for the period ended December 31, 1995, nor FYI's nor Newco's total
assets as shown on the last regularly prepared balance sheets of FYI and
Newco prepared prior to the Closing equal or exceed $100 million, so as to
subject the transactions contemplated by this Agreement
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to the filing and notice requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
6.15 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Neither FYI
nor Newco has used any accounting practices that are not in conformity
with generally accepted accounting principles for the purpose of
incorrectly reflecting on its financial statements or in its books of
account, or for the purpose of not reflecting on its financial statements
or in its books of account, any of the assets, liabilities, revenues or
expenses of FYI or Newco.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER AND THE
COMPANY
The obligations of the Stockholder and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions,
except that no such waiver shall be deemed to affect the survival of the
representations and warranties of FYI and Newco contained in Section 6
hereof.
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. All of the representations and warranties of FYI and Newco
contained in Section 6 shall be true and correct as of the Closing Date;
and each and all of the terms, covenants and conditions of this Agreement
to be complied with and performed by FYI and Newco on or before the
Closing Date shall have been duly complied with and performed.
7.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and
all other related legal matters shall be reasonably satisfactory to the
Company and the Stockholder and their counsel.
7.3 NO LITIGATION. No action or proceeding before a court or
any other Agency shall have been instituted or threatened to restrain or
prohibit the merger of Newco with the Company and no Agency shall have
taken any other action or made any request of the Company as a result of
which the management of the Company reasonably and in good faith deems it
inadvisable to proceed with the transactions hereunder.
7.4 OPINION OF COUNSEL. The Company and the Stockholder
shall have received an opinion from Locke Purnell Rain Harrell (A
Professional Corporation), counsel for FYI, dated the Closing Date, in the
form annexed hereto as Annex III.
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7.5 EMPLOYMENT AGREEMENT. Newco shall have executed and
delivered to the Stockholder the Employment Agreement with the Stockholder
in substantially the form attached hereto as Annex IV (the "Employment
Agreement").
7.6 ESCROW AGREEMENT. FYI and Newco shall have executed and
delivered to the Stockholder the Escrow Agreement with the Stockholder and
U.S. Trust Company of Texas, N.A. as escrow agent (the "Escrow Agent") in
substantially the form attached hereto as Annex V (the "Escrow
Agreement").
7.7 CONSENTS AND APPROVALS. All necessary consents of and
filings with any Agency relating to the consummation of the transactions
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or
prohibit the Merger and no Agency shall have taken any other action or
made any request of Company as a result of which Company deems it
inadvisable to proceed with the transactions hereunder.
7.8 GOOD STANDING CERTIFICATES. FYI and Newco each shall
have delivered to the Company a certificate, dated as of a date not more
than fifteen (15) days prior to the Closing Date, duly issued by the
Delaware Secretary of State and in each state in which FYI or Newco is
authorized to do business, showing that each of FYI and Newco is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for FYI and Newco, respectively, for all
periods prior to the Closing have been filed and paid.
7.9 RELEASES. FYI shall have caused the Stockholder and
Antonia C. Bauer to be released from any and all guarantees on any
obligations of the Company that they personally guaranteed for the benefit
of the Company, with all such guarantees on indebtedness being assumed by
FYI.
7.10 STOCK OPTIONS. Effective at the Effective Time of the
Merger, FYI shall have granted to the employees specified by the
Stockholder nonqualified options to acquire an aggregate of 50,000 shares
of FYI Stock pursuant to the terms of FYI 1995 Stock Option Plan (the
"Plan"), with such options to have a per share exercise price equal to the
Fair Market Value (as defined in the Plan) per share on the date of grant
and to vest in twenty percent (20%) increments on each of the first
through fifth anniversaries of the date of grant.
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7.11 NO MATERIAL ADVERSE CHANGE. No event or circumstance to
that effect shall have occurred that would constitute an FYI Material
Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF FYI AND NEWCO
The obligations of FYI and Newco with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions, except that
no such waiver shall be deemed to affect the survival of the
representations and warranties of the Company and the Stockholder
contained in Section 5 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. All of the representations and warranties of the Stockholder
and the Company contained in this Agreement shall be true and correct as
of the Closing Date; and each and all of the terms, covenants and
conditions of this Agreement to be complied with and performed by the
Stockholder and the Company on or before the Closing Date shall have been
duly complied with and performed.
8.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and
all other related legal matters shall be reasonably satisfactory to FYI
and its counsel.
8.3 NO LITIGATION. No action or proceeding before a court or
any other Agency shall have been instituted or threatened to restrain or
prohibit the Merger of the Company with and into Newco and no Agency shall
have taken any other action or made any request of FYI as a result of
which the management of FYI reasonably and in good faith deems it
inadvisable to proceed with the transactions hereunder.
8.4 EXAMINATION OF FINAL FINANCIAL STATEMENTS. Prior to the
Closing Date, FYI shall have had sufficient time to review the unaudited
consolidated balance sheets of the Company for the period ended April 30,
1996, and the unaudited consolidated statement of income, cash flows and
retained earnings of the Company for the period ended April 30, 1996,
disclosing no material adverse change in the financial condition of the
Company, taken as a whole, or the results of its operations from the
financial statements as of December 31, 1995.
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8.5 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date,
the Stockholder shall have repaid the Company in full all amounts owing by
the Stockholder to the Company.
8.6 INSURANCE. FYI shall be named as an additional named
insured on all of the Company's insurance policies.
8.7 STOCKHOLDER RELEASE; AMENDMENT OF EMPLOYMENT AGREEMENT.
(i) The Stockholder shall have delivered to FYI immediately prior to the
Closing Date an instrument dated the Closing Date in substantially the
form of Annex VI releasing the Company from any and all claims of the
Stockholder against the Company and obligations of the Company to the
Stockholder, except for items specifically identified on Schedule 8.7 as
being claims of or obligations to the Stockholder and continuing
obligations to Stockholder relating to his employment by the Surviving
Corporation, and (ii) the Company shall have delivered to FYI an
instrument in form and substance reasonably satisfactory to FYI amending
the terms of the Company's employment letter agreement with Edna M. Bauer
dated January 1, 1993 changing the expiration of the term of such
agreement to December 31, 1999.
8.8 TERMINATION OF RELATED PARTY AGREEMENTS. All existing
agreements between the Company and the Stockholder or business or personal
affiliates of the Company or the Stockholder, other than those set forth
on Schedule 8.8, shall have been cancelled.
8.9 OPINION OF COUNSEL. FYI shall have received an opinion
from Sonnenschein Nath & Rosenthal, counsel to the Company and the
Stockholder, dated the Closing Date, in the form annexed hereto as Annex
VII.
8.10 EMPLOYMENT AGREEMENT. The Stockholder shall have
executed and delivered to FYI and Newco the Employment Agreement.
8.11 NONCOMPETITION AGREEMENT. The Stockholder shall have
executed and delivered to FYI and Newco the Noncompetition Agreement with
FYI and Newco in substantially the form attached hereto as Annex VIII (the
"Noncompetition Agreement").
8.12 ESCROW AGREEMENT. The Stockholder shall have executed
and delivered to the Escrow Agent and FYI and Newco the Escrow Agreement.
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8.13 LOCK-UP AGREEMENT. The Stockholder shall have executed
and delivered to FYI and Newco the Lock-Up Agreement in substantially the
form annexed hereto as Annex IX (the "Lock-Up Agreement") with respect to
the shares of FYI Stock to be acquired thereby pursuant to Section 2
hereof containing the Stockholder's undertakings as set forth in Section
11.2 hereof.
8.14 CONSENTS AND APPROVALS. All necessary consents of and
filings with any Agency relating to the consummation of the transactions
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or
prohibit the Merger and no Agency shall have taken any other action or
made any request of FYI as a result of which FYI deems it inadvisable to
proceed with the transactions hereunder.
8.15 GOOD STANDING CERTIFICATES. The Company shall have
delivered to FYI a certificate, dated as of a date not more than fifteen
(15) days prior to the Closing Date, duly issued by the appropriate
governmental authority in the state of incorporation of the Company and,
unless waived by FYI, in each state in which the Company is authorized to
do business, showing the Company is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes
for the Company for all periods prior to the Closing have been filed and
paid.
8.16 NO MATERIAL ADVERSE EFFECT. No event or circumstance
shall have occurred that would constitute a Material Adverse Effect.
9. COVENANTS AFTER CLOSING
9.1 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. After the
Closing Date, FYI shall not and shall not permit any of the FYI
Subsidiaries to undertake any act that would jeopardize the tax-free
status of the reorganization, including:
(a) The retirement or reacquisition, directly or
indirectly, of all or part of the FYI Stock issued in connection
with the transactions contemplated hereby;
(b) The entering into of financial arrangements for
the benefit of the Stockholder in his capacity as such;
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(c) The disposition of any material part of the
assets of the Company within the two (2) years following the
Closing Date except in the ordinary course of business or to
eliminate duplicate services or excess capacity;
(d) The discontinuance of the historic business of
the Company; and
(e) The issuance of additional shares of Newco stock
that would result in FYI losing control of Newco within the
meaning of Section 368(c)(1) of the Code.
9.2 PREPARATION AND FILING OF TAX RETURNS.
(a) Each party hereto shall, and shall cause its
subsidiaries and affiliates to, provide to each of the other
parties hereto such cooperation and information as any of them
reasonably may request in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include
providing copies at no cost to the requesting party of all
relevant portions of relevant returns, together with relevant
accompanying schedules and relevant work papers, relevant
documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and tax
basis of property, which such party may possess. Each party shall
make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each
party required to file returns pursuant to this Agreement shall
bear all costs of filing such returns.
(b) Each of the Company, Newco, FYI and the
Stockholder shall comply with the tax reporting requirements of
Section 1.368-3 of the Treasury Regulations promulgated under the
Code, and shall treat the transaction as a tax-free reorganization
under Section 368(a) of the Code unless otherwise required by law.
The parties have independently determined and hereby agree that
the transaction constitutes a tax-free reorganization under
Section 368(a) of the Code and specifically that:
(i) Neither the Company, FYI or Newco is an
investment company as defined in Section 368(a)(2)(F)(iii) and
(iv) of the Code.
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(ii) The fair market value of the assets of
the Company exceeds the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
(iii) The Company is not under jurisdiction of
a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(iv) The fair market value of the FYI stock
and other consideration received by the Stockholder, will be
approximately equal to the fair market value of the Company Stock
surrendered in the Merger.
(v) There is no intercorporate indebtedness
existing between FYI and the Company or between Newco and the
Company that was issued, acquired, or will be settled at a
discount.
(vi) None of the compensation received by any
stockholder-employee of the Company after the Merger will be
separate consideration for, or allocable to, any of their shares
of the Company. None of the shares of FYI Stock received by the
Stockholder in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid
to the Stockholder in his capacity as an employee including, but
not limited to, amounts paid pursuant to the Employment Agreement
between the Company and the Stockholder described in Section 7.5
and compensation in the form of stock options described in Section
7.10, will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
(vii) No stock of Newco will be issued in the
transaction.
(viii) The proposed Merger is effected through
the laws of the United States, or a State or the District of
Columbia.
(ix) The proposed Merger is being undertaken
for reasons germane to the business of the Company.
9.3 COVENANTS CONCERNING TERMINATION OF S ELECTION.
(a) Taxes.
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(i) Liability for Taxes Incurred During S
Corporation Years. The Stockholder shall pay (and shall
indemnify, defend and hold harmless the Surviving Corporation from
and against liability with respect to) any and all Taxes,
interest, penalties and additions to Taxes that are imposed on him
or the Company and attributable to the taxable income of the
Company for all taxable periods during which the Company was an S
corporation (the "S Corporation Period"). The Stockholder shall
pay (and shall indemnify, defend and hold harmless the Surviving
Corporation from and against liability with respect to) any and
all Taxes, interest, penalties and additions to Taxes that are
imposed on him and/or the Company as a result of the Company's S
election being treated as invalid or ineffective for any reason or
such election being revoked or terminated prior to the Merger.
Subject to any rights of the Stockholder under Section 10.4, the
Stockholder shall pay (and shall indemnify, defend and hold
harmless the Surviving Corporation from and against liability with
respect to) any and all Taxes, interest, penalties and additions
to Taxes that are imposed on him and/or the Company (or the
Surviving Corporation) as a result of the Merger if the Merger
fails to qualify as a tax-free transaction pursuant to Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
(ii) Liability for Taxes Incurred During C
Corporation Years Including C Short Year. The Surviving
Corporation shall pay or cause to be paid (and shall indemnify,
defend and hold harmless the Stockholder from and against
liability with respect to) any and all Taxes, interest, penalties
and additions to Taxes attributable to the taxable income of the
Surviving Corporation for the period after the Merger (the "C
Corporation Period").
(b) If the Stockholder receives notice of an
intention by a taxing authority to audit any return of the
Stockholder that includes any item of income, gain, deduction,
loss or credit reported by the Company with respect to the S
Corporation Period that the Stockholder has reason to believe may
affect the Surviving Corporation's tax returns during the C
Corporation Period, the Stockholder shall inform the Surviving
Corporation, in writing, of the audit promptly after receipt of
such notice. If the Stockholder receives notice from a taxing
authority of any proposed adjustment for which the Surviving
Corporation may be required to indemnify hereunder (a "Proposed
Adjustment"), the Stockholder shall give notice to the Surviving
Corporation of the Proposed Adjustment promptly after receipt of
such notice from a taxing authority. Within twenty (20) days
following its receipt of such notice, the Surviving Corporation
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shall give notice to the Stockholder of its determination as to
whether or not it desires the Stockholder to contest such Proposed
Adjustment. Upon such request the Stockholder, at his option and
upon written notice to the Surviving Corporation within ten (10)
days after his receipt of the notice described in the preceding
sentence, shall (i) contest the Proposed Adjustment at the
Surviving Corporation's expense and permit the Surviving
Corporation to participate in (but not to control) such
proceedings, or (ii) permit the Surviving Corporation to contest
the Proposed Adjustment (including pursuing all administrative and
judicial appeals and demands). The Surviving Corporation shall
pay to the Stockholder on demand all reasonable costs and expenses
(including reasonable attorneys' and accountants' fees) that the
Stockholder may incur in contesting such Proposed Adjustments.
The Stockholder shall not make, accept or enter into a settlement
or other compromise, with respect to any Taxes indemnified
hereunder, or forego or terminate any proceeding undertaken
hereunder without the consent of the Surviving Corporation, which
consent shall not be unreasonably withheld. The Stockholder will
reasonably assist if the Surviving Corporation contests any
Proposed Adjustment.
(c) If the Surviving Corporation receives notice of
an intention by a taxing authority to audit any return of the
Surviving Corporation that includes any item of income, gain,
deduction, loss or credit reported by the Surviving Corporation
with respect to the period after the Merger during which the
Surviving Corporation is a C corporation that the Surviving
Corporation has reason to believe may affect the Stockholder's tax
returns during the S Corporation Period, the Surviving Corporation
shall inform the Stockholder in writing, of the audit promptly
after receipt of such notice. If the Surviving Corporation
receives notice from a taxing authority of any proposed adjustment
for which the Stockholder may be required to indemnify the
Surviving Corporation hereunder (a "Surviving Corporation Proposed
Adjustment"), the Surviving Corporation shall give notice to the
Stockholder of the Surviving Corporation Proposed Adjustment
promptly after receipt of such notice from a taxing authority.
Upon receipt of such notice from the Surviving Corporation, the
Stockholder may, by in turn giving prompt written notice to the
Surviving Corporation, request that the Surviving Corporation
contest such Surviving Corporation Proposed Adjustment. If the
Stockholder requests that any Surviving Corporation Proposed
Adjustment be contested, then the Surviving Corporation shall
contest the Surviving Corporation Proposed Adjustment (including
pursuing all administrative and judicial appeals and
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processes) at the Stockholder's expense and shall permit the
Stockholder to participate in (but not to control) such
proceeding.
(d) The parties shall cooperate fully with each other
in all matters relating to Taxes and in the determination of
amounts payable hereunder. In the case of disagreement as to the
course of action to be pursued in dealing with taxing authorities
(including, without limitation, matters with respect to
preparation and filing of tax returns, conduct of audits, and
proceedings in courts), the decision of the party (the Surviving
Corporation, on the one hand, or the Stockholder, on the other
hand) who will economically benefit from or be burdened by the
course of action (or in the case both parties benefit and/or are
burdened, the decision of the party with the greatest benefit or
burden) shall control.
9.4 CONTINUATION OF EMPLOYEE BONUS PLAN. FYI shall cause the
Surviving Corporation to maintain in full force and effect, for a period
of not less than three (3) years following the Closing, the employee bonus
plan of the Company upon substantially the same terms and conditions as
operated on the date hereof.
9.5 MINUTES OF FYI BOARD OF DIRECTOR'S MEETINGS. For a
period of three (3) years and thereafter for so long as the Stockholder
holds not less than three percent (3.0%) of outstanding FYI Stock, FYI
shall furnish the Stockholder with copies of the minutes of all FYI Board
of Director meetings and unanimous written consents of the FYI Board of
Directors promptly after the preparation, approval and execution thereof
by the Secretary of FYI (as to the minutes) and the directors of FYI (as
to the unanimous written consents).
10. INDEMNIFICATION
The Stockholder, FYI and Newco each make the following covenants
that are applicable to them, respectively:
10.1 FYI LOSSES.
(a) The Stockholder agrees to indemnify and hold
harmless FYI, Newco and the Surviving Corporation, and their respective
directors, officers, employees, representatives, agents and attorneys
from, against and in respect of any and all FYI Losses (as defined below)
suffered, sustained, incurred or required to be paid by any of them by
reason of (i) any representation or warranty made by the Company or the
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Stockholder in or pursuant to this Agreement (including, without
limitation, the representations and warranties contained in any
certificate delivered pursuant hereto but excluding the representations
and warranties set forth in Section 5.11) being untrue or incorrect in any
respect; (ii) any failure by the Company or the Stockholder to observe or
perform their covenants and agreements set forth in this Agreement or any
other agreement or document executed by them in connection with the
transactions contemplated hereby; (iii) the termination of or withdrawal
by the Company or any Group Member from any employee pension benefit plan,
as defined in Section 3(2)(A) of ERISA that is maintained pursuant to a
collective bargaining agreement under which more than one employer makes
contributions and to which the Company or any Group Member is then making
or accruing an obligation to make contributions or has within the
preceding five (5) plan years made contributions; and (iv) the items
described in Schedules 5.5 and 5.16 hereof but solely to the extent that
such claims exceed, individually or in the aggregate, $77,000, except in
any instance to the extent FYI Losses result from the gross negligence or
willful misconduct of FYI, Newco or the Surviving Corporation. This
Section 10.1 is intended to indemnify FYI, Newco and the Surviving
Corporation, and their respective directors, officers, employees,
representatives, agents and attorneys from the results of their
negligence. The Stockholder's obligations pursuant to this Section 10.1
shall expire two (2) years after the Closing, except with respect to (i)
his obligations under Section 5.19 hereof, which shall survive until the
expiration of the applicable period of the statutes of limitations
applicable period of the statutes of limitations applicable to ERISA
matters, (ii) his obligations under Section 5.8 hereof, which shall
survive until the earlier of (A) the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation
applicable to the payment of the Taxes to which such representations and
warranties relate without an assertion of a deficiency in respect thereof
by the applicable taxing authority or (B) the completion of the final
audit and determinations by the applicable taxing authority and final
disposition of any deficiency resulting therefrom, and (iii) his
obligations under the representations and warranties contained in Sections
5.1, 5.2 and 5.3 hereof, which shall survive indefinitely.
(b) "FYI Losses" shall mean all damages (including,
without limitation, amounts paid in settlement with the Stockholder's
consent, which consent may not be unreasonably withheld, but excluding
consequential damages), losses, obligations, liabilities, claims,
deficiencies, costs and expenses (including, without limitation,
reasonable attorneys' fees), penalties, fines, interest and monetary
sanctions, including, without limitation, reasonable attorneys' fees and
costs incurred to comply with injunctions and other court and Agency
orders, and other costs and expenses incident to any suit,
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action, investigation, claim or proceeding or to establish or enforce the
rights of FYI, Newco and the Surviving Corporation or such other persons
to indemnification hereunder.
10.2 ENVIRONMENTAL INDEMNITY.
(a) The Stockholder agrees to indemnify and hold
harmless FYI, Newco and the Surviving Corporation, and their respective
directors, officers, employees, representatives, agents and attorneys
from, against and in respect of any and all Environmental Costs (as
defined below), arising in any manner in connection with: (i) the release,
leak, discharge, spill, disposal, migration or emission of Hazardous
Substances from any property owned, leased or operated by the Company on
or prior to the Closing Date; or (ii) the failure of the Company to comply
with any applicable Environmental Requirements prior to the Closing Date.
This Section 10.2 is intended to indemnify FYI, Newco and the Surviving
Corporation and their respective directors, officers, employees,
representatives, agents and attorneys from the results of their
negligence.
(b) The obligations of this Section 10.2 shall
include the obligation to defend the Indemnified Parties (as defined
below) against any claim or demand for Environmental Costs, the obligation
to pay and discharge any Environmental Costs imposed on Indemnified
Parties, and the obligation to reimburse Indemnified Parties for any
Environmental Costs incurred or suffered, provided in each instance that
the claim for Environmental Costs arises in connection with a matter for
which Indemnified Parties are entitled to indemnification under this
Agreement. The obligation to reimburse the Indemnified Parties shall also
include the reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees) to establish or enforce the rights of FYI,
Newco and the Surviving Corporation or such other persons to
indemnification hereunder.
(c) "Environmental Costs" shall mean any of the
following that arise in any manner regardless of whether based in
contract, tort, implied or express warranty, strict liability,
Environmental Requirement or otherwise: all liabilities, losses,
judgments, damages, punitive damages, treble damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and reasonable
fees and disbursements of environmental consultants, all costs related to
the performance of any required or necessary assessments, investigations,
remediation, response, containment, closure, restoration, repair, cleanup
or detoxification of any impacted property, the preparation and
implementation of any maintenance, monitoring, closure, remediation,
abatement or other plans required by any governmental agency or by
Environmental Requirements and any other reasonable costs recovered or
recoverable under any Environmental Requirement),
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fines, penalties, or monetary sanctions. Environmental Costs shall
include without limitation: (i) damages for personal injury or death, or
injury to property or to natural resources; (ii) damage to real property
or damage resulting from the loss of the use of all or any part of the
property; (iii) the reasonable cost of any demolition, rebuilding or
repair of any property required by Environmental Requirements; and (iv)
the reasonable cost of repairing damage caused by remediation of any
environmental condition.
(d) This Section 10.2 shall be the exclusive means by
which FYI, Newco, the Surviving Corporation and their respective
directors, officers, employees, representatives, agents and attorneys
shall assert against the Stockholder any claim arising under Environmental
Requirements or connected in any way to Hazardous Substances.
(e) The Stockholder's obligations pursuant to this
Section 10.2 shall expire two (2) years after the Closing.
(f) As long as the Stockholder is providing a defense
in a timely manner in accordance with and pursuant to this Section 10.2,
the Stockholder (i) shall control any and all relevant communications with
third parties, and (ii) may direct the implementation of any remedy
consistent with generally accepted cleanup standards and remediation
principles.
10.3 EMPLOYEE COMPENSATION AND BENEFITS.
(a) The Stockholder agrees to indemnify and hold FYI,
Newco and the Surviving Corporation, and their respective directors,
officers, employees, representatives, agents and attorneys harmless from
and against any and all claims made by employees of the Company,
regardless of when made, for wages, salaries, bonuses, pension, workmen's
compensation, medical insurance, disability, vacation, severance, pay in
lieu of notice, sick benefits or other compensation or benefit
arrangements to the extent the same are based on employment service
rendered to the Company prior to the Closing Date or injury or sickness
occurring prior to the Closing Date (collectively, "Employee Claims");
provided, that the Stockholder shall not be liable for such claims to the
extent that amounts are reserved for such Employee Claims in the Financial
Statements.
(b) The Stockholder's obligations pursuant to this
Section 10.3 shall expire two (2) years after the Closing.
10.4 STOCKHOLDER LOSSES.
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(a) FYI and Newco jointly and severally agree to
indemnify and hold harmless the Stockholder, for and in respect of any and
all Stockholder Losses (as defined below) suffered, sustained, incurred or
required to be paid by the Stockholder by reason of (i) any representation
or warranty made by FYI or Newco in or pursuant to this Agreement
(including, without limitation, the representations and warranties
contained in any certificate delivered pursuant hereto) being untrue or
incorrect in any respect; (ii) any failure by FYI or Newco to observe or
perform its covenants and agreements set forth in this Agreement or any
other agreement or document executed by it in connection with the
transactions contemplated hereby; (iii) any liability for warranty claims
arising from the sale of goods or services by the Company subsequent to
the Closing Date, except in any instance to the extent Stockholder Losses
result from the gross negligence or willful misconduct of the Stockholder
(with respect to periods prior to the Closing Date); or (iv) any claim
arising from the ownership and/or operation of the Company or its assets
by FYI or Newco or from the ownership and/or operation of the other
operations of FYI or Newco. This Section 10.4 is intended to indemnify
the Stockholder from the results of his negligence.
(b) "Stockholder Losses" shall mean all damages
(including, without limitation, amounts paid in settlement with the
consent of FYI and Newco, which consent may not be reasonably withheld),
losses, obligations, liabilities, claims, deficiencies, costs and expenses
(including, without limitation, reasonable attorneys' fees), penalties,
fines, interest and monetary sanctions, including, without limitation,
reasonable attorneys' fees and costs incurred to comply with injunctions
and other court and Agency orders, and other costs and expenses incident
to any suit, action, investigation, claim or proceeding or to establish or
enforce the right of the Stockholder to indemnification hereunder.
10.5 INDEMNIFICATION FOR CERTAIN TAX MATTERS.
(a) Surviving Corporation's Indemnification for Tax
Liabilities. The Surviving Corporation shall indemnify, defend
and hold harmless the Stockholder from and against the
Stockholder's liability with respect to all Taxes, including
interest, penalties and additions to Taxes, resulting from any
final determination (or settlement) of an adjustment (by reason of
an amended return, claim for refund, audit or otherwise) including
any increase in items of income or gain or any decrease in item of
loss, deduction or credit reported to the Stockholder by the
Company with respect to the S Corporation Period resulting in an
increase in the Stockholder's S corporation taxable income, and a
corresponding decrease in the liability for Taxes payable by the
Surviving Corporation, provided however, the
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amount of any such indemnification payment shall be reduced by an
amount equal to the federal or state tax benefit, including
interest, arising due to deductions allowable for federal or state
tax purposes to the Stockholder for state or local taxes paid by
the Stockholder in respect of any taxable income shifted from the
C Corporation Period to the S Corporation Period which is subject
to indemnification hereunder. Moreover, notwithstanding the
foregoing, the amount of the payment required to be made by the
Surviving Corporation pursuant to this Section 10.5(a) shall not
exceed the amount, if any, by which (i) the amount of the
reduction in the liability for Taxes and interest thereon of the
Surviving Corporation that results from the adjustment exceeds
(ii) all reasonable costs incurred by the Surviving Corporation
reasonably attributable to securing such reduction in liability
for Taxes. Notwithstanding anything to the contrary in this
Agreement, this Section 10.5(a) shall not apply in the event there
is a final determination (or adjustment) that the Merger fails to
qualify as a tax-free transaction pursuant to Section 368(a)(1)(A)
and Section 368(a)(2)(D) of the Code.
(b) Stockholder Indemnification for Tax Liabilities.
The Stockholder shall indemnify, defend and hold harmless the
Surviving Corporation from and against the Surviving Corporation's
liability with respect to all Taxes, including interest, penalties
and additions to Taxes, resulting from any final determination (or
settlement) of an adjustment (by reason of an amended return,
claim for refund, audit or otherwise) to the Stockholder's taxable
income resulting in a decrease in the Stockholder's S Corporation
taxable income, and a corresponding increase in the liability for
Taxes payable by the Surviving Corporation, provided however, the
amount of any such indemnification payment shall be reduced by an
amount equal to the federal or state tax benefit, including
interest, arising due to deductions allowable for federal or state
tax purposes to the Surviving Corporation for state or local taxes
paid by the Surviving Corporation in respect of any taxable income
shifted from the S Corporation Period to the C Corporation Period
which is subject to indemnification hereunder. Moreover,
notwithstanding the foregoing, the amount of the payment required
to be made by the Stockholder pursuant to this Section 10.5(b)
shall not exceed the amount, if any, by which (i) the amount of
the reduction in the liability for Taxes and interest thereon of
the Stockholder that results from the adjustment exceeds (ii) all
reasonable costs incurred by the Stockholder reasonably
attributable to securing such reduction in liability for Taxes.
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10.6 NOTICE OF LOSS. Except to the extent set forth in the
next sentence, a party to the Agreement will not have any liability under
the indemnity provisions of this Agreement with respect to a particular
matter unless a notice setting forth in reasonable detail the breach or
other matter which is asserted has been given to the Indemnifying Party
(as defined below) and, in addition, if such matter arises out of a suit,
action, investigation, proceeding or claim, such notice is given promptly,
but in any event within thirty (30) days after the Indemnified Party (as
defined below) has knowledge of the matter. Notwithstanding the preceding
sentence, failure of the Indemnified Party to give notice hereunder shall
not release the Indemnifying Party from its obligations under this Section
10, except to the extent the Indemnifying Party is actually prejudiced by
such failure to give notice. With respect to FYI Losses, Environmental
Costs, Employee Claims and the matters described in Section 10.5(a), the
Stockholder shall be the Indemnifying Party and FYI and Newco and their
respective directors, officers, employees, representatives, agents and
attorneys shall be the Indemnified Parties. With respect to Stockholder
Losses and the matters described in Section 10.5(b), FYI and Newco shall
be the Indemnifying Party and the Stockholder shall be the Indemnified
Party.
10.7 RIGHT TO DEFEND. Upon receipt of notice of any matter
for which indemnification might be claimed by an Indemnified Party, the
Indemnifying Party shall be entitled to defend, contest or otherwise
protect against any such matter at its own cost and expense, and the
Indemnified Party must cooperate in any such defense or other action. The
Indemnified Party shall have the right, but not the obligation, to
participate at its own expense in defense thereof by counsel of its own
choosing, but the Indemnifying Party shall be entitled to control the
defense unless the Indemnified Party has relieved the Indemnifying Party
from liability with respect to the particular matter or the Indemnifying
Party fails to assume defense of the matter. In the event the
Indemnifying Party shall fail to defend, contest or otherwise protect in a
timely manner against any matter, the Indemnified Party shall have the
right, but not the obligation, thereafter to defend, contest or otherwise
protect against the same and make any compromise or settlement thereof and
recover the reasonable cost thereof from the Indemnifying Party including,
without limitation, reasonable attorneys' fees, disbursements and all
amounts paid as a result of such suit, action, investigation, claim or
proceeding or the compromise or settlement thereof; provided, however,
that the Indemnified Party must send a written notice to the Indemnifying
Party of any such proposed settlement or compromise, which settlement or
compromise the Indemnifying Party may reject, in its reasonable judgment,
within thirty (30) days of receipt of such notice. Failure to reject such
notice within such thirty (30) day period shall be deemed an acceptance of
such settlement or compromise. The Indemnified Party shall have the right
to effect a settlement or compromise over the
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objection of the Indemnifying Party; provided, that if (i) the
Indemnifying Party is contesting such claim in good faith or (ii) the
Indemnifying Party has assumed the defense from the Indemnified Party, the
Indemnified Party waives any right to indemnity therefor. If the
Indemnifying Party undertakes the defense of such matters, the Indemnified
Party shall not, so long as the Indemnifying Party does not abandon the
defense thereof, be entitled to recover from the Indemnifying Party any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than the reasonable costs of
investigation undertaken by the Indemnified Party with the prior written
consent of the Indemnifying Party.
10.8 COOPERATION. Each of FYI, Newco, the Surviving
Corporation, the Company and the Stockholder, and each of their
affiliates, successors and assigns shall cooperate with each other in the
defense of any suit, action, investigation, proceeding or claim by a third
party and, during normal business hours, shall afford each other access to
their books and records and employees relating to such suit, action,
investigation, proceeding or claim and shall furnish each other all such
further information that they have the right and power to furnish as may
reasonably be necessary to defend such suit, action, investigation,
proceeding or claim, including, without limitation, reports, studies,
correspondence and other documentation relating to Environmental
Protection Agency, Occupational Safety and Health Administration, and
Equal Employment Opportunity Commission matters.
10.9 SATISFACTION OF CLAIMS FROM ESCROW. FYI and Newco shall
have the option of recovering amounts owing thereto pursuant to Sections
10.1, 10.2 and 10.3 for FYI Losses, Environmental Costs and Employee
Claims from the Stockholder or from the shares of FYI Stock held in escrow
in accordance with the Escrow Agreement described in Section 7.6.
10.10 EXCLUSIVE REMEDY. The indemnification provided for in
this Section 10 shall be the exclusive remedy in any action seeking
damages or any other form of monetary relief brought by any party to this
Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
10.11 LIMITATIONS ON INDEMNIFICATION. FYI, Newco, the
Surviving Corporation and the other persons or entities indemnified
pursuant to Sections 10.1, 10.2 and 10.3 shall not assert any claim for
indemnification hereunder against the Stockholder until such time as and
solely to the extent that the aggregate of all claims that such persons
may have
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against the Stockholder shall exceed $75,000.00. Any amounts paid by FYI
or Newco to the Stockholder pursuant to this Section 10 or Section 9.3(a)
shall be paid fifty percent (50%) in cash and fifty percent (50%) in FYI
Stock valued at the then-fair market value thereof.
11. SECURITIES ACT REPRESENTATIONS AND TRANSFER RESTRICTIONS
The FYI Stock acquired by the Stockholder pursuant to this
Agreement is being acquired solely for his own account, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
11.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder
represents and warrants to FYI and Newco that he is an "accredited
investor" as defined in Regulation D promulgated under the 1933 Act; that
he is able to bear the economic risk of an investment in the FYI Stock
acquired pursuant to this Agreement and can afford to sustain a total loss
of such investment and has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of
the proposed investment in the FYI Stock; and that he has had an adequate
opportunity to ask questions and receive answers from the officers of FYI
concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of FYI, and the plans for the
operations of the business of FYI.
11.2 TRANSFER RESTRICTIONS. Except for transfers to immediate
family members who agree to be bound by the restrictions set forth in this
Section 11.2 (or trusts for the benefit of the Stockholder or family
members, the trustees of which so agree), for a period of two (2) years
from the Closing, the Stockholder shall not (a) sell, assign, exchange,
transfer, encumber, pledge, distribute or otherwise dispose of (i) any
shares of FYI Stock received by the Stockholder in the Merger, or (ii) any
interest (including, without limitation, an option to buy or sell) in any
such shares of FYI Stock, in whole or in part, and no such attempted
transfer shall be treated as effective for any purpose; or (b) engage in
any transaction, whether or not with respect to any shares of FYI Stock or
any interest therein, the intent or effect of which is to reduce the risk
of owning the shares of FYI Stock acquired pursuant to Section 2 hereof
(including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). Notwithstanding the
foregoing, the Stockholder shall be entitled to encumber or pledge his
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shares of FYI Stock to the extent and in the manner permitted of similar
situated senior executives at FYI. The certificates evidencing the FYI
Stock delivered to the Stockholder pursuant to Section 3 of this Agreement
will bear a legend substantially in the form set forth below and
containing such other information as FYI may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED
OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO
GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
ENCUMBRANCE, PLEDGE, DISTRIBUTION OR OTHER DISPOSITION PRIOR TO
THE SECOND ANNIVERSARY OF THE CLOSING DATE. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
The Stockholder will execute and deliver to FYI prior to or at the Closing
the Lock-Up Agreement containing the foregoing agreements.
12. GENERAL
12.1 COOPERATION. The Company, the Stockholder, FYI and Newco
shall each deliver or cause to be delivered to the other on the Closing
Date, and at such other times and places as shall be reasonably agreed to,
such additional instruments as the other may reasonably request for the
purpose of carrying out this Agreement. The Company will cooperate and
use its reasonable efforts to have the present officers, directors and
employees of the Company cooperate with FYI on and after the Closing Date
in furnishing information, evidence, testimony and other assistance in
connection with any Tax return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining
to all periods prior to the Closing Date.
12.2 SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES.
(a) Covenants and Agreements. Except as otherwise
provided herein, all covenants and agreements made hereunder or pursuant
hereto or in connection with the
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transactions contemplated hereby shall survive the Closing and shall
continue in full force and effect thereafter according to their terms
without limit as to duration.
(b) Representations and Warranties. All
representations and warranties contained herein shall survive the Closing
and shall continue in full force and effect thereafter for a period of two
(2) years following the Closing, except that (a) the representations and
warranties contained in Section 5.8 hereof shall survive until the earlier
of (i) the expiration of the applicable periods (including any extensions)
of the respective statutes of limitation applicable to the payment of the
Taxes to which such representations and warranties relate without an
assertion of a deficiency in respect thereof by the applicable taxing
authority or (ii) the completion of the final audit and determinations by
the applicable taxing authority and final disposition of any deficiency
resulting therefrom, (b) the representations and warranties contained in
Section 5.19 shall survive until the expiration of the applicable period
of the statutes of limitation applicable to ERISA matters, and (c) the
representations and warranties contained in Sections 5.1, 5.2 and 5.3
shall survive indefinitely.
(c) No Knowledge of Claims. Each of FYI and Newco
represents and warrants to the Company and the Stockholder that at the
date hereof neither FYI nor Newco knows of any breach or inaccuracy of any
representation or warranty made by the Company and the Stockholder
hereunder and of no basis for any claim under Section 10 hereof.
12.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation of law) and
shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of FYI, and the heirs and legal representatives of
the Stockholder.
12.4 ENTIRE AGREEMENT. This Agreement (including the
schedules, exhibits and annexes attached hereto) and the documents
delivered pursuant hereto constitute the entire agreement and
understanding among the Stockholder, the Company, Newco and FYI, and
supersede any prior agreement and understanding relating to the subject
matter of this Agreement. Any disclosure made pursuant to any Section of
this Agreement shall be an effective disclosure for any other Section of
this Agreement. This Agreement, upon execution, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its
terms and this Agreement and the Annexes hereto may be modified or amended
only by a written instrument executed by the Stockholder, the Company,
Newco
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and FYI, acting through their respective officers, duly authorized by
their respective Boards of Directors.
12.5 COUNTERPARTS. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be
deemed an original and all of which together shall constitute but one and
the same instrument.
12.6 BROKERS AND AGENTS. Except as disclosed on Schedule
12.6, each party represents and warrants that it employed no broker or
agent in connection with this transaction and agrees to indemnify the
other against all loss, cost, damages or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by
such indemnifying party.
12.7 EXPENSES. Whether or not the transactions herein
contemplated shall be consummated, (i) FYI and Newco will pay the fees,
expenses and disbursements of FYI and Newco and their respective agents,
representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all
costs and expenses incurred in the performance and compliance with all
conditions to be performed by FYI under this Agreement, and (ii) the
Stockholder will pay from personal funds and not from Company funds, the
fees, expenses and disbursements of its counsel incurred in connection
with the subject matter of this Agreement. The Stockholder shall pay all
sales, use, transfer, real property transfer, recording, gains, stock
transfer and other similar taxes and fees ("Transfer Taxes") incurred in
connection with the transactions contemplated by this Agreement. The
Stockholder shall file all necessary documentation and returns with
respect to such Transfer Taxes. In addition, the Stockholder acknowledges
that he, and not the Company or FYI, will pay all taxes due upon receipt
of the consideration payable to the Stockholder pursuant to Section 2
hereof.
12.8 NOTICES. All notices of communication required or
permitted hereunder shall be in writing and may be given by (a) depositing
the same in United States mail, addressed to the party to be notified,
postage prepaid and registered or certified with return receipt requested,
(b) delivering the same in person to an officer or agent of such party, or
(c) telecopying the same with electronic confirmation of receipt.
(i) If to FYI or Newco, addressed to them at:
F.Y.I. Incorporated
B&B (Baltimore-Washington)
Acquisition Corp.
3232 McKinney Avenue, Suite 900
Dallas, Texas 75204
Telecopy No.: (214) 953-7556
Attn: Margot T. Lebenberg, Esq.
with copies to:
Locke Purnell Rain Harrell
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2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy No.: (214) 740-8800
Attn: Charles C. Reeder, Esq.
(ii) If to the Stockholder, addressed to him at the
address set forth under (iii) below, with
copies to:
Sonnenschein Nath & Rosenthal
1301 K Street, N.W.
Suite 600, East Tower
Washington, DC 20005
Telecopy No.: (202) 408-6399
Attn: Fred L. Levy, Esq.
(iii) If to the Company, addressed to it at:
B&B Information and Image Management, Inc.
300 Prince George's Boulevard
Upper Marlboro, Maryland 20774
Telecopy No.: (301) 249-4898
and marked "Personal and Confidential"
with copies to:
Sonnenschein Nath & Rosenthal
1301 K Street, N.W.
Suite 600, East Tower
Washington, DC 20005
Telecopy No.: (202) 408-6399
Attn: Fred L. Levy, Esq.
or to such other address or counsel as any party hereto shall specify
pursuant to this Section 12.8 from time to time.
12.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
12.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
provided herein, no delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any breach or default
by any other party under this Agreement shall impair any such right, power
or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of any similar breach or default occurring
-51-
<PAGE> 60
later; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default occurring before or after that
waiver.
12.11 TIME. Time is of the essence with respect to this
Agreement.
12.12 REFORMATION AND SEVERABILITY. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to
the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and
if such modification is not possible, such provision shall be severed from
this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
12.13 REMEDIES CUMULATIVE. No right, remedy or election given
by any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law
or in equity.
12.14 CAPTIONS. The headings of this Agreement are inserted
for convenience only, shall not constitute a part of this Agreement or be
used to construe or interpret any provision hereof.
12.15 MODIFICATION. It is the intent of the parties that the
transactions be structured as a tax-free reorganization under Section
368(a) of the Code.
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<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
F.Y.I. INCORPORATED
By: /s/ ED H. BOWMAN, JR.
----------------------------------
Name: Ed H. Bowman, Jr.
Title: President and Chief
Executive Officer
B&B (BALTIMORE-WASHINGTON)
ACQUISITION CORP.
By: /s/ DAVID LOWENSTEIN
----------------------------------
Name: David Lowenstein
Title: Vice President and
Secretary of Treasurer
B&B INFORMATION AND IMAGE
MANAGEMENT, INC.
By: /s/ CHARLES J. BAUER, JR.
---------------------------------
Name: Charles J. Bauer, Jr.
Title: President
THE STOCKHOLDER:
/s/ CHARLES J. BAUER, JR.
-------------------------------------
Charles J. Bauer, Jr.
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<PAGE> 62
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
AGGREGATE CONSIDERATION TO BE PAID TO THE STOCKHOLDER
Aggregate consideration to be paid to the Stockholder:
Cash - $3,097,073
Stock - 183,333 shares of FYI Stock (and $5.94 in cash in
lieu of fractional shares), the market value of the FYI
Stock being deemed to be $18.00 per share.
<PAGE> 63
ANNEX II
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
FYI CHARTER DOCUMENTS
<PAGE> 64
ANNEX III
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
OPINION OF COUNSEL TO FYI
<PAGE> 65
ANNEX IV
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
EMPLOYMENT AGREEMENT
<PAGE> 66
ANNEX V
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
ESCROW AGREEMENT
<PAGE> 67
ANNEX VI
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
STOCKHOLDER RELEASE
<PAGE> 68
ANNEX VII
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
OPINION OF COUNSEL TO THE COMPANY
<PAGE> 69
ANNEX VIII
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
NONCOMPETITION AGREEMENT
<PAGE> 70
ANNEX IX
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
AND
THE STOCKHOLDER NAMED THEREIN
LOCK-UP AGREEMENT
<PAGE> 1
EXHIBIT 10.18
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 31st day of May, 1996
by and among
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
and
the STOCKHOLDERS named herein
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
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<S> <C> <C>
1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Delivery and Filing of Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Certificate of Incorporation, By-laws and
Board of Directors of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Certain Information With Respect to the
Capital Stock of the Premier, PDM, FYI and Newco . . . . . . . . . . . . . . . . . . . . . 2
1.5 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Manner of Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Calculation of FYI Shares for Premier . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Calculation of FYI Shares for PDM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Earnings Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. DELIVERY OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Delivery Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(A) Representations and Warranties of the Company
and the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Organization, Existence and Good Standing
of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Capital Stock of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Accounts and Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 Permits and Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.9 Assets and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 Real Property Leases; Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.11 Environmental Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.13 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.14 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.15 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.16 Litigation and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.18 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
<S> <C> <C>
5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.20 Employees; Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.22 Interests in Customers, Suppliers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.23 Business Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.24 Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.25 Bank Accounts and Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.26 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(B) Representations and Warranties of the Stockholders . . . . . . . . . . . . . . . . . . . . 21
5.27 Authority; Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.28 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.29 No Intention to Dispose of FYI Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.30 Validity of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.31 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.32 S Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6. REPRESENTATIONS OF FYI AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 FYI Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Validity of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Capitalization of FYI and Ownership of FYI . . . . . . . . . . . . . . . . . . . . . . . . 23
6.7 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Business; Real Property; Material Agreements;
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.10 Conformity with Law and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.11 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
STOCKHOLDERS AND PREMIER AND PDM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Representations and Warranties; Performance
of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.5 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.7 Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF FYI
AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Representations and Warranties; Performance
</TABLE>
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<TABLE>
<S> <C> <C>
of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.4 Examination of Final Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Repayment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 Stockholder Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.8 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.9 Termination of Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.10 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.11 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.12 Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.13 Lock-Up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.15 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.16 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Permitted Payments of Compensation by Premier and PDM . . . . . . . . . . . . . . . . . . . 30
9.2 Preservation of Tax and Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Preparation and Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.4 Covenants of PDM Concerning Termination of S Election . . . . . . . . . . . . . . . . . . . 32
9.5 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 FYI Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.3 Employee Compensation and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Stockholder Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5 Indemnification for Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.6 Notice of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.7 Right to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.8 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.9 Satisfaction of Claims From Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.10 Limitations of Indemnification; Proportionate Payments . . . . . . . . . . . . . . . . . . 40
11. SECURITIES ACT REPRESENTATIONS AND TRANSFER
RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.1 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.2 Survival of Covenants, Agreements, Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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<S> <C> <C>
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.6 Brokers and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.10 Exercise of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.11 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.12 Reformation and Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.13 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.14 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.15 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
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<PAGE> 6
SCHEDULES AND ANNEXES
<TABLE>
<CAPTION>
SCHEDULES
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<S> <C>
1.3(d) Officers of the Surviving Corporation
5.2 Jurisdictions of Qualification and Company Charter Documents
5.3 Capital Stock
5.5 Financial Statements and Contingent Liabilities
5.6 Accounts and Notes Receivable
5.7 Permits and Licenses
5.8 Taxes
5.9 Assets and Properties
5.10 Real Property Leases
5.11 Environmental Matters
5.12 Contracts
5.14 Government Contracts
5.16 Litigation
5.18 Intellectual Property Rights
5.19 Employee Benefit Plans
5.20 Employee Matters
5.21 Insurance
5.23 Business Relations
5.24 Officers and Directors
5.25 Bank Accounts
5.26 Absence of Certain Changes
5.27 Liens on Stock
6.6 FYI Capital Stock
6.8 FYI Subsidiaries
6.9 FYI Financial Information
6.10 FYI Compliance with Laws
6.11 No Violations by FYI
8.6 Continuing Obligations
8.7 Continuing Related Party Agreements
<CAPTION>
ANNEXES
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<S> <C>
I Stockholders of Premier and PDM
IIA and IIB Aggregate Consideration to be paid to the Stockholders
III FYI Charter Documents
IV Opinion of Counsel to FYI and Newco
V Employment Agreement
VI Stockholder Release
VII Opinion of Counsel to Premier and PDM
VIII Noncompetition Agreement
IX Lock-Up Agreement
</TABLE>
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<PAGE> 7
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 31st day of May, 1996, by and among F.Y.I. INCORPORATED, a
Delaware corporation ("FYI"), PREMIER ACQUISITION CORP., a Delaware
corporation ("Newco"), PREMIER DOCUMENT MANAGEMENT, INC. a Washington
corporation ("Premier"), and PDM SERVICES, INC., a California corporation
("PDM"), and the stockholders listed on Annex I hereto (each a
"Stockholder" and collectively the "Stockholders"). The Stockholders
constitute all of the Stockholders of Premier and PDM, and the
stockholders of Premier are hereinafter sometimes referred to as the
"Premier Stockholders" and the stockholder of PDM is hereinafter sometimes
referred to as the "PDM Stockholder."
WHEREAS, Newco is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on May 15,
1996, solely for the purpose of completing the transactions set forth
herein, and is a wholly-owned subsidiary of FYI, a corporation organized
and existing under the laws of the State of Delaware;
WHEREAS, the respective Boards of Directors of Newco, Premier and
PDM (which together are hereinafter collectively referred to as
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that each
of Premier and PDM merge with and into Newco pursuant to this Agreement
and the applicable provisions of the laws of the State of Delaware, such
transaction sometimes being herein called the "Merger";
WHEREAS, the Boards of Directors of FYI, Newco and Premier have
approved and adopted this Agreement and intend the transactions with
respect to Premier to qualify as partially tax-free transfers of property
under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code");
NOW, THEREFORE, for and in consideration of the premises and of
the mutual agreements, representations, warranties, provisions and
covenants herein contained, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
13. THE MERGER
13.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The
Constituent Corporations will cause Articles of Merger with respect to the
Merger (the "Articles of Merger") to be signed, verified and delivered to
the Secretary of State of the State of Delaware and, if required, a
similar filing to be made with the relevant authorities in the States of
Washington and California, on or before the Closing Date (as defined in
Section 4).
<PAGE> 8
13.2 EFFECTIVE TIME OF THE MERGER. The "Effective Time of the
Merger" shall be the Closing Date as defined in Section 4. At the
Effective Time of the Merger, each of Premier and PDM shall be merged with
and into Newco in accordance with the Articles of Merger, the separate
existence of each of Premier and PDM shall cease and the corporate name of
Newco shall be Premier Acquisition Corp. Newco shall be the surviving
party in the Merger and is hereinafter sometimes referred to as the
"Surviving Corporation." The Merger will be effected in a single
transaction.
13.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF
DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger:
(a) The Certificate of Incorporation of Newco then in
effect shall become the Certificate of Incorporation of the
Surviving Corporation; and subsequent to the Effective Time of the
Merger, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation until changed as
provided by law;
(b) The By-laws of Newco then in effect shall become
the By-laws of the Surviving Corporation; and subsequent to the
Effective Time of the Merger, such By-laws shall be the By-laws of
the Surviving Corporation until they shall thereafter be duly
amended;
(c) The Board of Directors of the Surviving
Corporation shall consist of the following persons:
Thomas C. Walker
David Lowenstein
Brian E. Whiteside
The Board of Directors of the Surviving Corporation shall hold
office subject to the provisions of the laws of the State of
Delaware and of the Certificate of Incorporation and By-laws of
the Surviving Corporation.
(d) The officers of the Surviving Corporation shall
be the persons set forth on Schedule 1.3(d) hereto, each of such
officers to serve, subject to the provisions of the Certificate of
Incorporation and By-laws of the Surviving Corporation and the
terms of any employment agreement executed by any such officer,
until such officer's successor is duly elected and qualified.
13.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF
THE PREMIER, PDM, FYI AND NEWCO. The respective designations and numbers
of outstanding shares and voting rights of each class of outstanding
capital stock of Premier, PDM, FYI and Newco as of the date of this
Agreement are as follows:
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<PAGE> 9
(a) As of the date of this Agreement, the authorized
capital stock of Premier consists of fifty thousand (50,000)
shares of Common Stock, $1.00 par value per share ("Premier
Stock"), of which twenty thousand (20,000) shares are issued and
outstanding;
(b) As of the date of this Agreement, the authorized
capital stock of PDM consists of ten million (10,000,000) shares,
no par value per share ("PDM Stock"), of which one hundred
thousand (100,000) shares are issued and outstanding;
(c) As of the date of this Agreement, the authorized
capital stock of FYI consists of twenty- six million (26,000,000)
shares of Common Stock, $.01 par value per share ("FYI Stock"), of
which five million two hundred sixty-nine thousand six hundred and
fifteen (5,269,615) shares are issued and outstanding, and one
million (1,000,000) shares of Preferred Stock, $.01 par value per
share, of which no shares are issued and outstanding; and
(d) As of the date of this Agreement, the authorized
capital stock of Newco consists of 3,000 shares of Common Stock,
$.01 par value per share ("Newco Stock"), of which ten (10) shares
are issued and outstanding.
13.5 EFFECT OF MERGER. At the Effective Time of the Merger,
the effect of the Merger shall be as provided in the applicable provisions
of the General Corporation Law of the State of Delaware (the "Delaware
GCL"). Except as herein specifically set forth, the identity, existence,
purposes, powers, objects, franchises, privileges, rights and immunities
of Premier and of PDM shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of Premier and
of PDM shall be merged with and into Newco, and Newco, as the Surviving
Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of Premier and of PDM shall cease and,
in accordance with the terms of this Agreement, the Surviving Corporation
shall possess all the rights, privileges, immunities and franchises, of a
public as well as of a private nature, and all property, real, personal
and mixed, and all debts due on whatever account, including subscriptions
to shares, all taxes, including those due and owing and those accrued, and
all other choses in action, and all and every other interest of or
belonging to or due to Premier and to PDM and Newco shall be taken and
deemed to be transferred to, and vested in, the Surviving Corporation
without further act or deed; and all property, rights and privileges,
powers and franchises and all and every other interest shall be thereafter
as effectually the property of the Surviving Corporation as they were of
Premier, PDM and Newco; and the title to any real estate, or interest
therein, whether by deed or otherwise, vested in Premier, PDM and Newco,
shall not revert or be in any way impaired by reason of the Merger. The
Surviving Corporation shall thenceforth be responsible and liable for all
the liabilities and obligations of Premier, PDM and Newco and any claim
existing, or action or proceeding pending, by or against
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<PAGE> 10
Premier, PDM or Newco may be prosecuted as if the Merger had not taken
place, or the Surviving Corporation may be substituted in their place.
Neither the rights of creditors nor any liens upon the property of
Premier, PDM or Newco shall be impaired by the Merger, and all debts,
liabilities and duties of Premier, PDM and Newco shall attach to the
Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties
had been incurred or contracted by such Surviving Corporation.
14. CONVERSION OF STOCK
14.1 MANNER OF CONVERSION. The manner of converting the
shares of (a) Premier Stock, (b) PDM Stock and (c) Newco Stock, issued and
outstanding immediately prior to the Effective Time of the Merger,
respectively, into (i) FYI Stock and (ii) shares of Common Stock, $.01 par
value per share, of the Surviving Corporation, shall be as follows:
As of the Effective Time of the Merger:
(a) All of the shares of Premier Stock issued and
outstanding immediately prior to the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the
holder thereof, automatically shall be deemed to represent (i)
that number of shares of FYI Stock determined pursuant to Section
2.2 below and (ii) the right to receive the amount of cash
determined pursuant to Section 2.2 below, such shares and cash to
be distributed to the Premier Stockholders as provided in Annex
IIA hereto;
(b) All of the shares of PDM Stock issued and
outstanding immediately prior to the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the
holder thereof, automatically shall be deemed to represent the
right to receive an amount of cash determined pursuant to Section
2.3 below, such cash to be distributed to the PDM Stockholder as
provided in Annex IIB hereto;
(c) All shares of Premier Stock that are held by
Premier as treasury stock and all shares of PDM Stock that are
held by PDM as treasury stock (as defined in Section 5) shall be
cancelled and retired and no shares of FYI Stock or other
consideration shall be delivered or paid in exchange therefor; and
(d) Each share of Newco Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger and without any action on the part of FYI,
automatically be converted into one fully paid and non-assessable
share of Common Stock of the Surviving Corporation that
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<PAGE> 11
shall constitute all of the issued and outstanding shares of
Common Stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All FYI Stock received by the Stockholders as of the Effective
Time of the Merger shall, except for restrictions on resale or transfer
described in Section 11.1 hereof, have the same rights as all of the other
shares of outstanding FYI Stock. All voting rights of such FYI Stock
received by the Stockholders shall be fully exercisable by the
Stockholders and the Stockholders shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Merger, FYI shall
have no class of capital stock issued and outstanding which, as a class,
shall have any rights or preferences senior to the shares of FYI Stock
received by the Stockholders, including, without limitation, any rights or
preferences as to dividends or as to the assets of FYI upon liquidation or
dissolution or as to voting rights.
14.2 CALCULATION OF FYI SHARES FOR PREMIER. All Premier Stock
shall be converted, as a result of the Merger, into the number of shares
of FYI Stock and the amount of cash set forth in Annex IIA attached
hereto.
14.3 CALCULATION OF FYI SHARES FOR PDM. All PDM Stock shall
be converted, as a result of the Merger, into the amount of cash set forth
in Annex IIB attached hereto.
14.4 EARNINGS ADJUSTMENT. All earnings and cash flow of
Premier and of PDM for the period from April 30, 1996 (the "Effective
Date") through the Effective Time of the Merger shall be for the benefit
of Newco and shall be conveyed to Newco at the Closing pursuant to the
Merger of the Company into Newco.
15. DELIVERY OF SHARES
15.1 DELIVERY PROCEDURE. At or after the Effective Time
of the Merger and at the Closing:
(a) The Stockholders, as the holders of all
outstanding certificates representing shares of Premier Stock and
of PDM Stock, shall, upon surrender of such certificates, be
entitled to receive the number of shares of FYI Stock and the
amount of cash calculated pursuant to Section 2.2 and Section 2.3
above less the sum of $200,000 in cash to be retained by Newco for
a period of one hundred twenty (120) days from the date of the
Closing as security and as an offset for any breach of the
representations, warranties, covenants and agreements of Premier,
PDM and the Stockholders, and for the Stockholders'
indemnification obligations, each as set forth herein; and
(b) Until the certificates representing Premier Stock
and PDM Stock have been surrendered by the Stockholders and
replaced by the FYI Stock, the
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<PAGE> 12
certificates for Premier Stock and PDM Stock shall, for all
corporate purposes be deemed to evidence the ownership of the
number of shares of FYI Stock and/or cash that such Stockholders
are entitled to receive as a result of the Merger, as set forth in
Section 2.2 and Section 2.3 above, notwithstanding the number of
shares of Premier or PDM Stock such certificates represent.
16. CLOSING
On the Closing Date (as defined below), the parties shall take all
actions necessary (i) to effect the Merger (including, if permitted by
applicable state law, the filing with the appropriate state authorities of
the Articles of Merger) and (ii) to effect the conversion and delivery of
shares referred to in Section 3 hereof (hereinafter referred to as the
"Closing"). The Closing shall take place at the offices of Locke Purnell
Rain Harrell (A Professional Corporation), 2200 Ross Avenue, Suite 2200,
Dallas, Texas 75201. The date on which the Closing shall occur shall be
referred to as the "Closing Date." On the Closing Date, the Articles of
Merger shall be filed with the appropriate state authorities, or if
already filed shall become effective, and all transactions contemplated by
this Agreement, including the conversion and delivery of shares, the
delivery by wire transfers or by certified checks in amounts equal to the
aggregate cash portion of the consideration that the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Section 2
hereof, shall occur and be deemed to be completed. Time is of the
essence.
17. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS
Each of Premier and Brian E. Whiteside, jointly and severally,
represent and warrant that all of the following representations and
warranties with respect to Premier and its business and operations set
forth in this Section 5(A) are true and correct at the time of the
Closing, and each of PDM and the PDM Stockholder jointly and severally
represent and warrant that all of the following representations and
warranties with respect to PDM and its business and operations set forth
in this Section 5(A) are true and correct at the time of the Closing.
Accordingly, unless the context clearly requires otherwise, references to
the Company, the Stockholders and the Company Stock in this Section 5
shall mean Premier, the Premier Stockholders and the Premier Stock with
respect to the representations and warranties made by Premier and Brian E.
Whiteside, and shall mean PDM, the PDM Stockholder and the PDM Stock with
respect to the representations and warranties made by PDM and the PDM
Stockholder.
17.1 AUTHORIZATION. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation
of each such party, enforceable in accordance with its terms, except that
(i) such enforcement may be subject
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<PAGE> 13
to bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, (ii) the remedy of specific
performance and injunctive relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings
may be brought and (iii) rights to indemnification hereunder may be
limited under applicable securities laws. The Company has full corporate
power, capacity and authority to execute this Agreement and the Articles
of Merger and all other agreements and documents contemplated hereby.
17.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF THE COMPANY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation with all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The
Company is duly qualified or licensed as a foreign corporation and in good
standing in each jurisdiction in which the character or location of the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the
failure to be so duly qualified or licensed would not have a material
adverse effect on the business, financial condition, results of operations
or prospects of the Company. Set forth on Schedule 5.2 is a list of the
jurisdictions in which the Company is qualified or licensed to do business
as a foreign corporation. True, complete and correct copies of the
Articles of Incorporation of the Company certified by the Secretary of
State of the applicable state of incorporation as of the date not more
than twenty (20) days prior to the Closing and of the By-laws of the
Company are all attached hereto on Schedule 5.2. Except as set forth on
Schedule 5.2, the minute books of the Company, as heretofore made
available to FYI, are correct and complete in all material respects.
17.3 CAPITAL STOCK OF THE COMPANY.
(a) The Company's authorized capital stock is as set
forth in Section 1.4(a) or (b), as applicable. All of the Company
Stock has been validly issued and is fully paid and nonassessable
and no holder thereof is entitled to any preemptive rights. There
are no outstanding conversion or exchange rights, subscriptions,
options, warrants or other arrangements or commitments obligating
the Company to issue any shares of capital stock or other
securities or to purchase, redeem or otherwise acquire any shares
of capital stock or other securities, or to pay any dividend or
make any distribution in respect thereof, except as set forth on
Schedule 5.3.
(b) The Stockholders (i) own of record and
beneficially (subject to the community property interest of any
Stockholder's spouse) and have good and marketable title to all of
the issued and outstanding shares of the Company Stock, free and
clear of any and all liens, mortgages, security interests,
encumbrances, pledges, charges, adverse claims, options, rights or
restrictions of any character
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<PAGE> 14
whatsoever other than standard state and federal securities law
private offering legends and restrictions (collectively, "Liens"),
and (ii) have the right to vote the Company Stock on any matters
as to which any shares of the Company Common Stock are entitled to
be voted under the laws of the state of incorporation of the
Company and the Company's Articles of Incorporation and By-laws,
free of any right of any other person.
17.4 SUBSIDIARIES. The Company does not presently own, of
record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is the
Company, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
17.5 FINANCIAL STATEMENTS.
(a) The Company has previously furnished to FYI and
Newco the reviewed balance sheet of the Company as of December 31,
1995 and the related statements of operations, stockholder's
equity and cash flows for the three fiscal years then ended, as
reviewed by Moss Adams, certified public accountants, together
with management's statements of operations and stockholders'
equity for the four-month period ended April 30, 1996
(collectively, the "Financial Statements"). The Financial
Statements present fairly the financial position and results of
operations of the Company as of the indicated dates and for the
indicated periods and have been prepared in accordance with
generally accepted accounting principles consistently applied
("GAAP"). The Company has previously permitted FYI and Newco full
access to papers pertaining to the Financial Statements, including
those work papers in the possession of or prepared by Moss Adams.
(b) Except to the extent (and not in excess of the
amounts) reflected in the December 31, 1995 balance sheet included
in the Financial Statements or as disclosed on Schedule 5.5, the
Company has no liabilities or obligations (including, without
limitation, Taxes (as defined in Section 5.8) payable and deferred
Taxes and interest accrued since December 31, 1995) required to be
reflected in the Financial Statements (or the notes thereto) in
accordance with GAAP other than current liabilities incurred in
the ordinary course of business, consistent with past practice,
subsequent to December 31, 1995. The Company has also delivered
to FYI on Schedule 5.5, in the case of those liabilities that are
contingent, a reasonable estimate of the maximum amount that may
be payable. For each such contingent liability, the Company has
provided to FYI the following information:
(i) A summary description of the liability
together with the following:
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<PAGE> 15
(A) Copies of all relevant
documentation relating thereto;
(B) Amounts claimed and any other
action or relief sought; and
(C) Name of claimant and all other
parties to the claim, suit or proceeding.
(ii) The name of each court or agency before
which such claim, suit or proceeding is pending;
(iii) The date such claim, suit or proceeding
was instituted; and
(iv) A reasonable best estimate by the
Company of the maximum amount, if any, which is likely to
become payable with respect to each such liability with
respect to each such liability. If no estimate is
provided, the Company's best estimate shall for purposes
of this Agreement be deemed to be zero.
17.6 ACCOUNTS AND NOTES RECEIVABLE. Set forth on Schedule 5.6
is an accurate list of the accounts and notes receivable of the Company,
as of April 30, 1996, including any such amounts that are not reflected in
the balance sheet as of December 31, 1995 included within the Financial
Statements, and including receivables from and advances to employees and
the Stockholders. The Company shall provide FYI with an aging of all
accounts and notes receivable showing amounts due in 30-day aging
categories. Except to the extent reflected on Schedule 5.6, such accounts
and notes are collectible in the amount shown on Schedule 5.6, net of
reserves reflected in such balance sheet.
17.7 PERMITS AND INTANGIBLES. The Company holds all licenses,
franchises, permits and other governmental authorizations, including
permits, titles (including motor vehicle titles and current
registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned
or held by the Company, the absence of any of which would have a material
adverse effect on the business, operations, properties, assets or
condition (financial or otherwise) of the Company taken as a whole (a
"Material Adverse Effect"). The Company has delivered to FYI an accurate
list and summary description as Schedule 5.7 hereto of all such licenses,
franchises, permits and other governmental authorizations. To the
knowledge of the Company and the Stockholders, the licenses, franchises,
permits and other governmental authorizations listed on Schedule 5.7 are
valid, and the Company has not received any notice that any governmental
authority intends to cancel, terminate or not renew any such license,
franchise, permit or other governmental authorization. The Company has
conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
permits, licenses,
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<PAGE> 16
orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing except where such noncompliance or
violation would not have a Material Adverse Effect. Except as
specifically provided on Schedule 5.7, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation
of, or adversely affect the rights and benefits afforded to the Company
by, any such licenses, franchises, permits and governmental
authorizations.
17.8 TAX MATTERS.
(a) The Company has filed all income tax returns
required to be filed thereby and all returns of other Taxes (as defined
below) required to be filed thereby and has paid or provided for all Taxes
shown to be due on such returns and all such returns are accurate and
correct in all material respects. Except as set forth on Schedule 5.8,
(i) no action or proceeding for the assessment or collection of any Taxes
is pending against the Company; (ii) no deficiency, assessment or other
formal claim for any Taxes has been asserted or made against the Company
that has not been fully paid or finally settled; and (iii) no issue has
been formally raised by any taxing authority in connection with an audit
or examination of any return of Taxes. No federal, state or foreign
income tax returns of the Company have been examined, and there are no
outstanding agreements or waivers extending the applicable statutory
periods of limitation for such Taxes for any period. All Taxes that the
Company has been required to collect or withhold have been duly withheld
or collected and, to the extent required, have been paid to the proper
taxing authority. No Taxes will be assessed on or after the Closing Date
against the Company for any tax period ending on or prior to April 30,
1996, or for any period ending after April 30, 1996 with respect to any
portion of such tax period that includes or is prior to April 30, 1996
other than for Taxes disclosed on Schedule 5.8. For purposes of this
Agreement, "Taxes" shall mean all taxes, charges, fees, levies or other
assessments including, without limitation, income, excise, property,
withholding, sales and franchise taxes, imposed by the United States, or
any state, county, local or foreign government or subdivision or agency
thereof, and including any interest, penalties or additions attributable
thereto.
(b) The Company is not a party to any Tax allocation
or sharing agreement.
(c) None of the assets of the Company constitutes
tax-exempt bond financed property or tax- exempt use property, within the
meaning of Section 168 of the Code. The Company is not a party to any
"safe harbor lease" that is subject to the provisions of Section 168(f)(8)
of the Code as in effect prior to the Tax Reform Act of 1986, or to any
"long-term contract" within the meaning of Section 460 of the Code.
(d) At the Closing Date, Premier will hold at least
ninety percent (90%) of the fair market value of its net assets and at
least seventy percent (70%) of the fair market value of its gross assets
held immediately prior to the Closing Date. For purposes
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<PAGE> 17
of making this representation, amounts paid by the Company to pay
reorganization expenses, amounts paid by Premier pursuant to Section 9.1
and all redemptions and distributions in anticipation of or as part of the
plan of reorganization by the Company will be included as assets of the
Company immediately prior to the Merger.
(e) At the Closing Date, Premier will not have
outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in Premier
that, if exercised or converted, would affect FYI's acquisition or
retention of ownership of more than eighty percent (80%) of the total
combined voting power of all classes of Premier stock and more than eighty
percent (80%) of the total number of shares of each class of Premier
non-voting stock. Premier has no plan or intention to issue additional
shares of its stock that would result in FYI losing control of the
Surviving Corporation within the meaning of Section 368(c) of the Code.
(f) Premier is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(g) The fair market value of the assets of Premier
exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the assets are subject.
(h) Premier is not under jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
(i) The liabilities of Premier to be assumed by Newco
and the liabilities to which the transferred assets are subject were
incurred by Premier in the ordinary course of its trade or business.
(j) The fair market value of the FYI stock and other
consideration received by the Premier Stockholders, will be approximately
equal to the fair market value of the Company Stock surrendered in the
Merger.
(k) There is no plan or intention by any Premier
Stockholder to sell, exchange, or otherwise dispose of more than five
percent (5%) of the number of shares of FYI Stock received by such Premier
Stockholder in the Merger as of the Effective Time of the Merger. For
purposes of this representation, shares of Premier Stock exchanged for
cash or other property and shares of Premier Stock exchanged for cash in
lieu of fractional shares of FYI Stock will be treated as outstanding
Premier Stock on the date of the transaction. Moreover, shares of Premier
Stock and shares of FYI stock held by the Premier Stockholders and
otherwise sold, redeemed, or disposed of prior to or subsequent to the
Closing Date will be considered in making this representation. In
addition, there is no plan or intention by any Premier Stockholder to
sell, exchange or otherwise dispose of FYI Stock, if any, received by such
Premier Stockholder pursuant to (i) Section 10.11 or (ii) the Earnout
provisions described in Annex IIA.
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(l) Premier and the Premier Stockholders and to the
best knowledge of Premier, FYI and Newco will each pay their respective
expenses, if any, incurred in connection with the Merger.
(m) There is no intercorporate indebtedness existing
between FYI and Premier or between Newco and Premier that was issued,
acquired, or will be settled at a discount.
(n) None of the shares of FYI Stock received by the
Stockholders in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to the
Stockholders in their capacities as employees, including but not limited
to amounts paid pursuant to the Employment Agreement described in Section
7.5 and any options granted to the Stockholders pursuant to Section 9.5,
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services.
(o) No stock of Newco will be issued in the
transaction.
(p) All amounts paid by the Company to the
Stockholders pursuant to Section 9.1 represent reasonable compensation for
services performed by the Stockholders for the Company.
(q) Premier is a C corporation within the meaning of
Subchapter C of the Code and PDM is an S corporation within the meaning of
Subchapter S of the Code. PDM has qualified as and has properly reported
its operations as an S corporation within the meaning of Subchapter S of
the Code since the inception of its corporate existence. Premier
presently files its federal income tax returns on a cash basis of
accounting, and the Surviving Cooperation will be required to utilize an
accrual method of accounting after the Merger.
17.9 ASSETS AND PROPERTIES.
(a) Real Property. The Company does not own or hold
any interest in real property other than as set forth in Schedule 5.10.
(b) Personal Property. Except as set forth on
Schedule 5.9 and except for inventory and supplies disposed of or
consumed, and accounts receivable collected or written off, and cash
utilized, all in the ordinary course of business consistent with past
practice, the Company owns all of its inventory, equipment and other
personal property (both tangible and intangible) reflected on the latest
balance sheet included in the Financial Statements or acquired since
December 31, 1995, free and clear of any Liens, except for statutory Liens
for current taxes, assessments or governmental charges or levies on
property not yet due and payable.
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(c) Condition of Properties. Except as set forth on
Schedule 5.9, the leasehold estates the subject of the Real Property
Leases (as defined in Section 5.10) and the tangible personal property
owned or leased by the Company are in good operating condition and repair,
ordinary wear and tear excepted; and neither the Company nor the
Stockholders have any knowledge of any condition not disclosed herein of
any such leasehold estate that would materially affect the fair market
value, use or operation of any leasehold estate or otherwise have a
Material Adverse Effect.
(d) Compliance. To the knowledge of the Company and
the Stockholders, the continued use and occupancy of the leasehold estates
the subject of the Real Property Leases as currently operated, used and
occupied will not violate any zoning, building, health, flood control,
fire or other law, ordinance, order or regulation or any restrictive
covenant. To the knowledge of the Company and the Stockholders, there are
no violations of any federal, state, county or municipal law, ordinance,
order, regulation or requirement affecting any portion of the leasehold
estates and no written notice of any such violation has been issued by any
governmental authority.
17.10 REAL PROPERTY LEASES; OPTIONS. Schedule 5.10 sets forth
a list of (i) all leases and subleases under which the Company is lessor
or lessee or sublessor or sublessee of any real property, together with
all amendments, supplements, nondisturbance agreements, brokerage and
commission agreements and other agreements pertaining thereto ("Real
Property Leases"); (ii) all material options held by the Company or
contractual obligations on the part of the Company to purchase or acquire
any interest in real property; and (iii) all options granted by the
Company or contractual obligations on the part of the Company to sell or
dispose of any material interest in real property. Copies of all Real
Property Leases and such options and contractual obligations have been
delivered to FYI and Newco. The Company has not assigned any Real
Property Leases or any such options or obligations. There are no Liens on
the interest of the Company in the Real Property Leases, subject only to
(i) Liens for taxes and assessments not yet due and payable and (ii) those
matters set forth on Schedule 5.10. The Real Property Leases and options
and contractual obligations listed on Schedule 5.10 are in full force and
effect and constitute binding obligations of the Company and the other
parties thereto, and (x) there are no defaults thereunder and (y) no event
has occurred that with notice, lapse of time or both would constitute a
default by the Company or, to the best knowledge of the Company and the
Stockholders, by any other party thereto.
17.11 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) (i) During the occupancy and operation of
the "Subject Property" (as defined below) by the Company and, to the best
knowledge of the Company and the Stockholders, prior to its occupancy and
operation, the operations of the Subject Property, and any use, storage,
treatment, disposal or transportation of "Hazardous Substances" (as
defined below) that has occurred in or on the Subject Property prior to
the
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date of this Agreement have been in compliance with "Environmental
Requirements" (as defined below); (ii) during the occupancy and operation
of the Subject Property by the Company and, to the best knowledge of the
Company and the Stockholders, prior to its occupancy or operation, no
release, leak, discharge, spill, disposal or emission of Hazardous
Substances has occurred in, on or under the Subject Property in a quantity
or manner that violates or requires further investigation or remediation
under Environmental Requirements; (iii) to the best knowledge of the
Company and the Stockholders, the Subject Property is free of Hazardous
Substances as of the date of this Agreement, except for the presence of
small quantities of Hazardous Substances utilized by the Company or other
tenants of the Subject Property in the ordinary course of their business;
(iv) there is no pending or threatened litigation or administrative
investigation or proceeding concerning the Subject Property involving
Hazardous Substances or Environmental Requirements; (v) to the best
knowledge of the Company and the Stockholders, there are no above-ground
or underground storage tank systems located at the Subject Property; and
(vi), except as set forth on Schedule 5.11, the Company has never owned,
operated, or leased any real property other than the Subject Property.
(b) Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Environmental Requirements" means all laws, statutes,
rules, regulations, ordinances, guidance documents, judgments,
decrees, orders, agreements and other restrictions and
requirements (whether now or hereafter in effect) of any
governmental authority, including, without limitation, federal,
state and local authorities, relating to the regulation or
protection of human health and safety, natural resources,
conservation, the environment, or the storage, treatment,
disposal, transportation, handling or other management of
industrial or solid waste, hazardous waste, hazardous or toxic
substances or chemicals, or pollutants.
"Hazardous Substance" means (i) any "hazardous substance"
as defined in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended from
time to time (42 U.S.C. Sections 9601 et seq.)("CERCLA") or any
regulations promulgated thereunder; (ii) petroleum and petroleum
by-products; or (iii) any additional substances or materials that
have been or are currently classified or considered to be
pollutants, hazardous or toxic under Environmental Requirements.
"Subject Property" means all property subject to the Real
Property Leases.
17.12 CONTRACTS.
(a) Set forth on Schedule 5.12 is a list of all
material contracts, agreements, arrangements and commitments (whether oral
or written) to which the
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<PAGE> 21
Company is a party or by which its assets or business are bound including,
without limitation, contracts, agreements, arrangements or commitments
that relate to (i) the sale, lease or other disposition by the Company of
all or any substantial part of its business or assets (otherwise than in
the ordinary course of business), (ii) the purchase or lease by the
Company of a substantial amount of assets (otherwise than in the ordinary
course of business), (iii) the supply by the Company of any customer's
requirements for any item or the purchase by the Company of its
requirements for any item or of a vendor's output of any item, (iv)
lending or advancing funds by the Company, (v) borrowing of funds or
guaranteeing the borrowing of funds by any other person, whether under an
indenture, note, loan agreement or otherwise, (vi) any transaction or
matter with any affiliate of the Company, (vii) noncompetition, (viii)
licenses and grants to or from the Company relating to any intangible
property listed on Schedule 5.18, (ix) the acquisition by the Company of
any operating business or the capital stock of any person since December
31, 1995, or (x) any other matter that is material to the business, assets
or operations of the Company ("Contracts").
(b) Except as set forth on Schedule 5.12, each
Contract is in full force and effect on the date hereof, the Company is
not in default under any Contract, the Company has not given or received
notice of any default under any Contract, and, to the knowledge of the
Company and the Stockholders, no other party to any Contract is in default
thereunder.
17.13 NO VIOLATIONS. A certified copy of the Certificate of
Incorporation and a true, correct and complete copy of the By-laws, both
as amended to date, of the Company (the "Charter Documents") have been
delivered to FYI. The execution, delivery and performance of this
Agreement and the other agreements and documents contemplated hereby by
the Company and the Stockholders and the consummation of the transactions
contemplated hereby will not (i) violate any provision of any Charter
Document, (ii) violate any statute, rule, regulation, order or decree of
any public body or authority by which the Company or the Stockholders or
its or their respective properties or assets are bound, or (iii) result in
a violation or breach of, or constitute a default under, or result in the
creation of any encumbrance upon, or create any rights of termination,
cancellation or acceleration in any person with respect to any Contract or
any material license, franchise or permit of the Company or any other
agreement, contract, indenture, mortgage or instrument to which the
Company is a party or by which any of its properties or assets is bound.
17.14 GOVERNMENT CONTRACTS. Except as set forth on Schedule
5.14, the Company is not now a party to any governmental contracts subject
to price redetermination or renegotiation.
17.15 CONSENTS. Except as set forth on Schedule 5.15, no
consent, approval or other authorization of any governmental authority or
under any Contract or other
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agreement or commitment to which the Company or the Stockholders are
parties or by which its or their respective assets are bound is required
as a result of or in connection with the execution or delivery of this
Agreement and the other agreements and documents to be executed by the
Company and the Stockholders or the consummation by the Company and the
Stockholders of the transactions contemplated hereby.
17.16 LITIGATION AND RELATED MATTERS. Set forth on Schedule
5.16 is a list of all actions, suits, proceedings, investigations or
grievances pending against the Company or, to the best knowledge of the
Company and the Stockholders, threatened against the Company, the business
or any property or rights of the Company, at law or in equity, before or
by any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign ("Agencies"). None of the actions, suits, proceedings or
investigations listed on Schedule 5.16 either (i) results or would, if
adversely determined, have a Material Adverse Effect or (ii) affects or
would, if adversely determined, affect the right or ability of the Company
to carry on its business substantially as now conducted. The Company is
not subject to any continuing court or Agency order, writ, injunction or
decree applicable specifically to its business, operations or assets or
its employees, nor in default with respect to any order, writ, injunction
or decree of any court or Agency with respect to its assets, business,
operations or employees. Schedule 5.16 lists (x) all worker's
compensation claims outstanding against the Company as of the date hereof
and (y) all actions, suits or proceedings filed by or against the Company
since December 31, 1995.
17.17 COMPLIANCE WITH LAWS. The Company (a) is in compliance
with all applicable laws, regulations (including federal, state and local
procurement regulations), orders, judgments and decrees except where the
failure to so comply would not have a Material Adverse Effect, and (b)
possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct its business in the manner in which and in the
jurisdictions and places where such business is now conducted.
17.18 INTELLECTUAL PROPERTY RIGHTS. Schedule 5.18 lists the
domestic and foreign trade names, trademarks, service marks, trademark
registrations and applications, service mark registrations and
applications, patents, patent applications, patent licenses, software
licenses and copyright registrations and applications owned by the Company
or used thereby in the operation of its business (collectively, the
"Intellectual Property"), which Schedule indicates (i) the term and
exclusivity of its rights with respect to the Intellectual Property and
(ii) whether each item of Intellectual Property is owned or licensed by
the Company, and if licensed, the licensor and the license fees therefor.
Unless otherwise indicated on Schedule 5.18, the Company has the right to
use and license the Intellectual Property, and the consummation of the
transactions contemplated hereby will not result in the loss or material
impairment of any rights of the Company in the Intellectual Property.
Each item constituting part of the Intellectual Property has been, to the
extent indicated on Schedule 5.18, registered with, filed in or issued by,
as the case may be, the
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United States Patent and Trademark Office or such other government entity,
domestic or foreign, as is indicated on Schedule 5.18; all such
registrations, filings and issuances remain in full force and effect; and
all fees and other charges with respect thereto are current. Except as
stated on Schedule 5.18, there are no pending proceedings or adverse
claims made or, to the best knowledge of the Company and the Stockholders,
threatened against the Company with respect to the Intellectual Property;
there has been no litigation commenced or threatened in writing within the
past five (5) years with respect to the Intellectual Property or the
rights of the Company therein; and the Company and the Stockholders have
no knowledge that (i) the Intellectual Property or the use thereof by the
Company conflicts with any trade names, trademarks, service marks,
trademark or service mark registrations or applications, patents, patent
applications, patent licenses or copyright registrations or applications
of others ("Third Party Intellectual Property"), or (ii) such Third Party
Intellectual Property or its use by others or any other conduct of a third
party conflicts with or infringes upon the Intellectual Property or its
use by the Company.
17.19 EMPLOYEE BENEFIT PLANS. Each employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained or contributed to
by the Company or any of its Group Members (as defined below)
(collectively, the "Plans") is listed on Schedule 5.19, is in substantial
compliance with applicable law and has been administered and operated in
all material respects in accordance with its terms. Each Plan that is
intended to be "qualified" within the meaning of Section 401(a) of the
Code has received a favorable determination letter from the Internal
Revenue Service (the "IRS") and no event has occurred and no condition
exists that could be expected to result in the revocation of any such
determination. No event that constitutes a "reportable event" (within the
meaning of Section 4043(b) of ERISA) for which the 30- day notice
requirement has not been waived by the Pension Benefit Guaranty
Corporation (the "PBGC") has occurred with respect to any Plan. No Plan
is subject to Title IV of ERISA, and neither the Company nor any Group
Member has made any contributions to or participated in any "multiple
employer plan" (within the meaning of the Code or ERISA) or
"multi-employer plan" (as defined in Section 4001(a)(3) of ERISA). Full
payment has been made of all amounts that the Company was required under
the terms of the Plans to have paid as contributions to such Plans on or
prior to the date hereof (excluding any amounts not yet due) and all
amounts properly accrued to date as liabilities of the Company that have
not been paid have been properly recorded on the Financial Statements, and
no Plan that is subject to Part 3 of Subtitle B of Title 1 of ERISA has
incurred any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived.
The Company and, to the knowledge of the Company and the Stockholders, no
other "disqualified person" or "party in interest" (within the meaning of
Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively)
has engaged in any transactions in connection with any Plan that could be
expected to result in the imposition of a material penalty pursuant to
Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or a tax
pursuant to Section 4975(a) of the Code. No material claim, action,
proceeding,
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or litigation has been made, commenced or, to the knowledge of the Company
and the Stockholders, threatened with respect to any Plan (other than for
benefits payable in the ordinary course and PBGC insurance premiums). No
Plan or related trust owns any securities in violation of Section 407 of
ERISA. Neither the Company nor any Group Member has incurred any
liability or taken any action, or has any knowledge of any action or
event, that could cause it to incur any liability (i) under Section 412 of
the Code or Title IV of ERISA with respect to any "single employer plan"
(within the meaning of Section 4001(a)(15) of ERISA), (ii) on account of a
partial or complete withdrawal (within the meaning of Section 4205 and
4203 of ERISA, respectively) with respect to any "multi-employer plan"
(within the meaning of Section 3(37) of ERISA), (iii) on account of unpaid
contributions to any such multi- employer plan, or (iv) to provide health
benefits or other non-pension benefits to retired or former employees,
except as specifically required by Section 4980B(f) of the Code. Except
as set forth on Schedule 5.19, neither the execution and delivery of this
Agreement by the Company or the consummation of the transactions
contemplated hereby will (i) entitle any current or former employee of the
Company to severance pay, unemployment compensation or any similar
payment, (ii) accelerate the time of payment or vesting, or increase the
amount of, any compensation due to any such employee or former employee,
or (iii) directly or indirectly result in any payment made or to be made
to or on behalf of any person to constitute a "parachute payment" (within
the meaning of Section 280G of the Code). For purposes of this Agreement,
"Group Member" shall mean any member of any "affiliated service group" as
defined in Section 414(m) of the Code that includes the Company, any
member of any "controlled group of corporations" as defined in Section
1563 of the Code that includes the Company or any member of any group of
"trades or businesses under common control" as defined by Section 414(c)
of the Code that includes the Company.
17.20 EMPLOYEES; EMPLOYEE RELATIONS.
(a) Schedule 5.20 sets forth (i) the name and current
annual salary (or rate of pay) and other compensation (including, without
limitation, normal bonus, profit-sharing and other compensation) now
payable by the Company to each employee whose current total annual
compensation or estimated compensation is $25,000 or more, (ii) any
increase to become effective after the date of this Agreement in the total
compensation or rate of total compensation payable by the Company to each
such person, (iii) any increase to become payable after the date of this
Agreement by the Company to employees other than those specified in clause
(i) of this Section 5.20(a), (iv) all presently outstanding loans and
advances (other than routine travel advances to be repaid or formally
accounted for within sixty (60) days) made by the Company to, or made to
the Company by, any director, officer or employee, (v) all other
transactions between the Company and any director, officer or employee
thereof since December 31, 1995, and (vi) all accrued but unpaid vacation
pay owing to any officer or employee that is not disclosed on the
Financial Statements.
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(b) Except as disclosed on Schedule 5.20, the Company
is not a party to, or bound by, the terms of any collective bargaining
agreement, and the Company has not experienced any material labor
difficulties during the last five (5) years. Except as set forth on
Schedule 5.20, there are no labor disputes existing, or to the best
knowledge of the Company and the Stockholders, threatened involving, by
way of example, strikes, work stoppages, slowdowns, picketing, or any
other interference with work or production, or any other concerted action
by employees. No charges or proceedings before the National Labor
Relations Board, or similar agency, exist, or to the best knowledge of the
Company and the Stockholders, are threatened.
(c) The relationships enjoyed by the Company with its
employees are good and the Company and the Stockholders have no knowledge
of any facts that would indicate that the employees of the Company will
not continue in the employ thereof following the Closing on a basis
similar to that existing on the date of this Agreement. Except as
disclosed on Schedule 5.20, the Company is not a party to any employment
contract with any individual or employee, either express or implied. No
legal proceedings, charges, complaints or similar actions exist under any
federal, state or local laws affecting the employment relationship
including, but not limited to: (i) anti-discrimination statutes such as
Title VII of the Civil Rights Act of 1964, as amended (or similar state or
local laws prohibiting discrimination because of race, sex, religion,
national origin, age and the like); (ii) the Fair Labor Standards Act or
other federal, state or local laws regulating hours of work, wages,
overtime and other working conditions; (iii) requirements imposed by
federal, state or local governmental contracts such as those imposed by
Executive Order 11246; (iv) state laws with respect to tortious employment
conduct, such as slander, false light, invasion of privacy, negligent
hiring or retention, intentional infliction of emotional distress, assault
and battery, or loss of consortium; or (v) the Occupational Safety and
Health Act, as amended, as well as any similar state laws, or other
regulations respecting safety in the workplace; and to the best knowledge
of the Company and the Stockholders, no proceedings, charges, or
complaints are threatened under any such laws or regulations and no facts
or circumstances exist that would give rise to any such proceedings,
charges, complaints, or claims, whether valid or not. The Company is not
subject to any settlement or consent decree with any present or former
employee, employee representative or any government or Agency relating to
claims of discrimination or other claims in respect to employment
practices and policies; and no government or Agency has issued a judgment,
order, decree or finding with respect to the labor and employment
practices (including practices relating to discrimination) of the Company.
Since December 31, 1994 the Company has not incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act or
similar state laws; and the Company has not laid off more than ten percent
(10%) of its employees at any single site of employment in any ninety (90)
day period during the twelve (12) month period ending April 30, 1996.
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(d) To the best knowledge of the Company and the
Stockholders, the Company is in compliance in all material respects with
the provisions of the Americans with Disabilities Act.
17.21 INSURANCE. Schedule 5.21 contains an accurate list of
the policies and contracts (including insurer, named insured, type of
coverage, limits of insurance, required deductibles or co-payments, annual
premiums and expiration date) for fire, casualty, liability and other
forms of insurance maintained by, or for the benefit of, the Company. All
such policies are in full force and effect and shall remain in full force
and effect through the Closing Date and are adequate for the business
engaged in by the Company. Neither the Company nor the Stockholders have
received any notice of cancellation or non-renewal or of significant
premium increases with respect to any such policy. Except as disclosed on
Schedule 5.21, no pending claims made by or on behalf of the Company under
such policies have been denied or are being defended against third parties
under a reservation of rights by an insurer thereof. All premiums due
prior to the date hereof for periods prior to the date hereof with respect
to such policies have been timely paid.
17.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. No stockholder,
officer, director or affiliate of the Company possesses, directly or
indirectly, any financial interest in, or is a director, officer, employee
or affiliate of, any corporation, firm, association or business
organization that is a client, supplier, customer, lessor, lessee or
competitor of the Company. Ownership of securities of a corporation whose
securities are registered under the Securities Exchange Act of 1934 not in
excess of five percent (5%) of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section 5.22.
17.23 BUSINESS RELATIONS. Schedule 5.23 contains an accurate
list of all significant customers of the Company (i.e., those customers
representing five percent (5%) or more of the Company's revenues for the
twelve (12) months ended December 31, 1995). Except as set forth on
Schedule 5.23, to the best knowledge of the Company and the Stockholders,
no customer or supplier of the Company will cease to do business therewith
after the consummation of the transactions contemplated hereby, which
cessation would have a Material Adverse Effect. Except as set forth on
Schedule 5.23, since December 31, 1995, the Company has not experienced
any difficulties in obtaining any inventory items necessary to the
operation of its business, and, to the best knowledge of the Company and
the Stockholders, no such shortage of supply of inventory items is
threatened or pending. The Company is not required to provide any bonding
or other financial security arrangements in any material amount in
connection with any transactions with any of its customers or suppliers.
17.24 OFFICERS AND DIRECTORS. Set forth on Schedule 5.24 is a
list of the current officers and directors of the Company.
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17.25 BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 5.25 sets
forth each bank, savings institution and other financial institution with
which the Company has an account or safe deposit box and the names of all
persons authorized to draw thereon or to have access thereto. Each person
holding a power of attorney or similar grant of authority on behalf of the
Company is identified on Schedule 5.25. Except as disclosed on such
Schedule, the Company has not given any revocable or irrevocable powers of
attorney to any person, firm, corporation or organization relating to its
business for any purpose whatsoever.
17.26 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 5.26 or as otherwise contemplated by this Agreement,
since December 31, 1995, there has not been (a) any damage, destruction or
casualty loss to the physical properties of the Company (whether or not
covered by insurance), (b) any event or circumstance in the business,
operations, financial condition or results of operations or prospects of
the Company that would have a Material Adverse Effect, (c) any entry into
any transaction, commitment or agreement (including, without limitation,
any borrowing) material to the Company, except transactions, commitments
or agreements in the ordinary course of business consistent with past
practice, (d) any declaration, setting aside or payment of any dividend or
other distribution in cash, stock or property with respect to the capital
stock or other securities of the Company, any repurchase, redemption or
other acquisition by the Company of any capital stock or other securities,
or any agreement, arrangement or commitment by the Company to do so, (e)
any increase that is material in the compensation payable or to become
payable by the Company to its directors, officers, employee or agents or
any increase in the rate or terms of any bonus, pension or other employee
benefit plan, payment or arrangement made to, for or with any such
directors, officers, employees or agents, except as set forth on Schedule
5.26, (f) any sale, transfer or other disposition of, or the creation of
any Lien upon, any part of the assets of the Company, tangible or
intangible, except for sales of inventory and use of supplies and
collections of accounts receivables in the ordinary course of business
consistent with past practice, or any cancellation or forgiveness of any
debts or claims by the Company, (g) any change in the relations of the
Company with or loss of its customers or suppliers, of any loss of
business or increase in the cost of inventory items or change in the terms
offered to customers, which would have a Material Adverse Effect, or (h)
any capital expenditure (including any capital leases) or commitment
therefor by the Company in excess of $10,000.
(B) REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties in this Section 5(B) as they apply to him
or her are true and correct as of the date of this Agreement and at the
time of the Closing.
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17.27 AUTHORITY; OWNERSHIP. The Stockholder has the full legal
right, power and authority to enter into this Agreement. The Stockholder
owns beneficially (subject to any community property interest of his or
her spouse) and of record the shares of the Company Stock set forth
opposite such Stockholder's name on Annex I and such Company Stock,
together with the other shares of Company Stock set forth on Annex I,
constitutes all of the outstanding shares of capital stock of the Company,
and, except as set forth on Schedule 5.27 hereof, such Company Stock owned
by the Stockholder is owned free and clear of all Liens other than
standard state and federal securities laws private offering restrictions.
The Stockholder has owned the Company Stock since the date set forth on
Annex I.
17.28 PREEMPTIVE RIGHTS. The Stockholder does not have, or
hereby waives, any preemptive or other right to acquire shares of Company
Stock or FYI Stock, that the Stockholder has or may have had other than
rights of the Stockholder to acquire FYI Stock pursuant to (i) this
Agreement or (ii) any option granted by FYI.
17.29 NO INTENTION TO DISPOSE OF FYI STOCK. Each Premier
Stockholder represents that there is no current plan or intention by such
Premier Stockholder to sell, exchange or otherwise dispose of more than
five percent (5%) of the number of shares of FYI Stock received by such
Premier Stockholder in the Merger as of the Effective Time of the Merger.
For purposes of this representation, shares of Premier Stock exchanged for
cash or other property and shares of Premier Stock exchanged for cash in
lieu of fractional shares of FYI Stock will be treated as outstanding
Premier Stock on the date of the transaction. Moreover, shares of Premier
Stock and shares of FYI Stock held by the Premier Stockholder and
otherwise sold, redeemed, or disposed of prior to or subsequent to the
Closing Date will be considered in making this representation. In
addition, each Premier Stockholder represents that there is not any
current plan or intention by such Premier Stockholder to sell, exchange or
otherwise dispose of FYI Stock, if any, received by such Premier
Stockholder pursuant to (i) Section 10.11 or (ii) the Earnout provisions
described in Annex IIA.
17.30 VALIDITY OF OBLIGATIONS. This Agreement, the Employment
Agreement, the Noncompetition Agreement and the Lock-Up Agreement have
each been duly executed and delivered and are the legal, valid and binding
obligations of the Stockholder that is a party thereto in accordance with
their respective terms (it being understood and agreed by the parties
hereto that each Stockholder is making this representation and warranty
solely with respect to such Stockholder alone and not with respect to any
other Stockholder).
17.31 PAYMENTS. All amounts paid by the Company to the
Stockholders pursuant to Section 9.1 represents reasonable compensation
for services performed by the Stockholders for the Company.
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17.32 S CORPORATION. The PDM Stockholder hereby represents and
warrants as of the time of the Closing that (i) PDM qualifies as an S
corporation within the meaning of Subchapter S of the Code and (ii) PDM
has qualified as and has properly reported its operations as an S
corporation within the meaning of Subchapter S of the Code since the
inception of its corporate existence.
18. REPRESENTATIONS OF FYI AND NEWCO
FYI and Newco severally and jointly represent and warrant that all
of the following representations and warranties in this Section 6 are true
and correct at the time of the Closing.
18.1 DUE ORGANIZATION. Each of FYI and Newco is duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and is duly authorized and qualified under all
applicable laws, regulations, and ordinances of public authorities to
carry on its businesses in the places and in the manner as now conducted
except for where the failure to be so authorized or qualified would not
have a material adverse effect on its business, operations, affairs,
properties, assets or condition (financial or otherwise).
18.2 FYI STOCK. The FYI Stock to be delivered to the
Stockholders at the Closing Date shall constitute valid and legally issued
shares of FYI, fully paid and nonassessable, and except as set forth in
this Agreement, (a) will be owned free and clear of all Liens created by
FYI, and (b) will be legally equivalent in all respects to the FYI Stock
issued and outstanding as of the date hereof. The shares of FYI Stock to
be issued to the Stockholders pursuant to this Agreement will be
registered under the Securities Act of 1933, as amended, (the "1933 Act").
18.3 VALIDITY OF OBLIGATIONS. The execution and delivery of
this Agreement, the Employment Agreements, the Noncompetition Agreements
and the Lock-Up Agreements by FYI and Newco and the performance by each of
FYI and Newco of the transactions contemplated herein or therein have been
duly and validly authorized by the respective Boards of Directors of FYI
and Newco to the extent that it is a party thereto, and this Agreement,
the Employment Agreements, the Noncompetition Agreements and the Lock-Up
Agreements have each been duly and validly authorized by all necessary
corporate action, duly executed and delivered and are the legal, valid and
binding obligations of each of FYI and Newco to the extent that it is a
party thereto, enforceable against such party thereto in accordance with
their respective terms.
18.4 AUTHORIZATION. The representatives of FYI and Newco
executing this Agreement have the corporate authority to enter into and
bind FYI and Newco to the terms of this Agreement. FYI and Newco have the
full legal right, power and authority to enter into this Agreement and the
Merger.
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18.5 NO CONFLICTS. The execution, delivery and performance of
this Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will
not:
(a) Conflict with, or result in a breach or violation
of Certificate of Incorporation or By- laws of either FYI or
Newco;
(b) Materially conflict with, or result in a material
default (or would constitute a default but for any requirement of
notice or lapse of time or both) under any document, agreement or
other instrument to which either FYI or Newco is a party, or
violate or result in the creation or imposition of any lien,
charge or encumbrance on any of FYI's or Newco's properties
pursuant to (i) any law or regulation to which either FYI or Newco
or any of their respective property is subject, or (ii) any
judgment, order or decree to which FYI or Newco is bound or any of
their respective property is subject; or
(c) Result in termination or any impairment of any
material permit, license, franchise, contractual right or other
authorization of FYI or Newco.
18.6 CAPITALIZATION OF FYI AND OWNERSHIP OF FYI STOCK. The
authorized and outstanding capital stock of FYI and Newco is as set forth
in Sections 1.4(c) and 1.4(d), respectively. All issued and outstanding
shares of FYI stock are duly authorized, validly issued, fully paid and
nonassessable. There are no obligations of FYI to repurchase, redeem or
otherwise acquire any shares of FYI capital stock. Except as set forth on
Schedule 6.6, there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which FYI is a party
or by which it is bound obligating FYI to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of FYI
or obligating FYI to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. All of the shares of FYI Stock to be issued to the
Stockholders in accordance herewith will be duly authorized, validly
issued, fully paid and nonassessable.
18.7 TRANSACTIONS IN CAPITAL STOCK. There has been no
transaction or action taken with respect to the equity ownership of FYI or
Newco in contemplation of the transactions described in this Agreement
that would prevent FYI from accounting for such transactions on a
reorganization accounting basis.
18.8 SUBSIDIARIES. Set forth on Schedule 6.8 hereto is a list
of the subsidiaries of FYI (each an "FYI Subsidiary" and collectively the
"FYI Subsidiaries"). Newco has no subsidiaries.
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18.9 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS; FINANCIAL
INFORMATION. Attached hereto as Schedule 6.9 are FYI's audited historical
financial statements for the year ended December 31, 1995 and its
financial statements as filed on Form 10-Q with the Securities and
Exchange Commission for the quarter ended March 31, 1996. Such FYI
financial statements have been prepared in accordance with GAAP and
present fairly the financial position of FYI as of the indicated dates and
for the indicated periods. FYI has provided Premier, PDM and the
Stockholders with a true, complete and correct copy of its Registration
Statement on Form S-1 (Registration No. 33-98608 and Registration No.
333-1084) and Prospectus Supplement to Prospectus as filed with the
Securities and Exchange Commission on May 17, 1996 and of all amendments
thereto. Newco was formed in May 1996, and has no historical financial
statements or information.
18.10 CONFORMITY WITH LAW AND LITIGATION. Neither FYI nor
Newco is in violation of any law or regulation or any order of any court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over either
of them that would have a material adverse effect on the business,
operations, affairs, properties, assets or condition (financial or
otherwise) of FYI and the FYI Subsidiaries taken as a whole (an "FYI
Material Adverse Effect"). Except as set forth on Schedule 6.10, there
are no claims, actions, suits or proceedings, pending or, to the knowledge
of FYI or Newco, threatened, against or affecting FYI or Newco, at law or
in equity, or before or by any Agency having jurisdiction over either of
them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. FYI (including the FYI
Subsidiaries) has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth in
applicable Federal, state and local statutes, ordinances, orders,
approvals, variances, rules and regulations and is not in violation of any
of the foregoing that would have an FYI Material Adverse Effect.
18.11 NO VIOLATIONS. Copies of the Certificate of
Incorporation (as of the date hereof, certified by the Secretary or an
Assistant Secretary of each of FYI and Newco and by the Secretary of State
of the State of Delaware) and the By-laws (certified by the Secretary or
an Assistant Secretary of each of FYI and Newco), of FYI and Newco (the
"FYI Charter Documents") are attached hereto as Annex III; neither FYI nor
Newco is (a) in violation of any FYI Charter Document or (b) in default,
under any material lease, instrument, agreement, license, permit to which
it is a party or by which its properties are bound (the "FYI Material
Documents"); and, (i) the rights and benefits of FYI (including the FYI
Subsidiaries) under the FYI Material Documents will not be materially and
adversely affected by the transactions contemplated hereby and (ii) the
execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby
will not result in any material violation or breach or constitute a
default under, any of the terms or provisions of the FYI Material
Documents or the FYI Charter Documents. Except as set forth on Schedule
6.11, none of the FYI Material Documents requires notice to, or the
consent or approval of, any Agency or other
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third party to any of the transactions contemplated hereby to remain in
full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. The minute
books of FYI and of each FYI Subsidiary as heretofore made available to
Premier and PDM are true and correct.
18.12 TAXES.
(a) The fair market value of the FYI Stock and other
consideration received by the Stockholders will be approximately
equal to the aggregate fair market value of the Premier Stock and
the PDM Stock surrendered in the Merger.
(b) Prior to the Merger, FYI will own all of the
outstanding stock of Newco. At all times prior to the Merger, no
person other than FYI has owned, or will own, any of the
outstanding stock of Newco.
(c) (i) Newco was formed by FYI solely for the
purpose of engaging in the transaction contemplated by the
Agreement.
(ii) There were not as of the date of the
Agreement and there will not be at the Closing Date, any
outstanding or authorized options, warrants, convertible
securities, calls, rights, commitments or any other agreements of
any character which Newco is a party to, or may be bound by,
requiring it to issue, transfer, sell, purchase, redeem or acquire
any shares of its capital stock or any securities or rights
convertible into, exchangeable for, evidencing the right to
subscribe for or acquire, any shares of its capital stock.
(iii) As of the date of this Agreement and the
Closing Date, except for obligations or liabilities incurred in
connection with (A) its incorporation or organization and (B) the
transactions contemplated thereby and in the Agreement, Newco has
not and will not have incurred, directly or indirectly through any
subsidiary, any obligations or liabilities or engaged in any
business or activities of any type or kind whatsoever or entered
into any agreement or arrangements with any person or entity.
(iv) Prior to the Closing Date, Newco did not
own any asset other than an amount of cash necessary to
incorporate Newco and to pay the expenses of the Merger
attributable to Newco and such assets as were necessary to perform
its obligations under this Agreement.
(v) FYI has no plan or intention to cause
the Surviving Corporation to issue additional shares of its stock
that would result in FYI losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code.
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(d) FYI has no plan or intention to reacquire any of
its stock issued in the Merger.
(e) FYI has no plan or intention to liquidate Newco
or merge Newco with or into another corporation (other than as
described in this Agreement); sell or otherwise dispose of the
stock of Newco; or cause Newco or any of its subsidiaries to sell
or otherwise dispose of any of its assets or of any of the assets
acquired from Premier or PDM, other than as contemplated by this
Agreement, directly or indirectly, except for (i) dispositions
made in the ordinary course of business, (ii) transfers of assets
to a corporation all of whose outstanding stock is owned directly
by Newco or (iii) transfers of assets by direct or indirect
wholly-owned subsidiaries of Newco to other direct or indirect
wholly-owned subsidiaries of Newco.
(f) Any liabilities of Premier and PDM assumed by
Newco and any liabilities to which the transferred assets of
Premier and PDM are subject were incurred by Premier and by PDM in
the ordinary course of business.
(g) FYI, Newco, and to the best knowledge of FYI,
Premier, PDM and the Stockholders will each pay their respective
expenses, if any, incurred in connection with the Merger.
(h) There is no intercorporate indebtedness existing
between FYI and Premier and PDM or between Newco and Premier and
PDM that was issued, acquired, or will be settled at a discount.
(i) Neither FYI nor Newco is an investment company as
defined in section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) None of the compensation received by any
stockholder-employee of Premier or PDM after the Merger will be
separate consideration for, or allocable to, any of their shares
of Premier or PDM, as the case may be; none of the shares of FYI
Stock received by any stockholder-employee in the Merger will be
separate consideration for, or allocable to, any employment
agreement; and the compensation paid to any stockholder-employee
after the Merger pursuant to arrangements entered into after the
Merger will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at
arm's- length for similar services.
(k) The proposed Merger is effected through the laws
of the United States, or a State or the District of Columbia.
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(l) The proposed Merger is being undertaken for
reasons germane to the business of Premier and of PDM.
(m) FYI has no plan or intention to cause the
Surviving Corporation immediately after the Closing Date to hold
less than 90% of the fair market value of its net assets and 70%
of the fair market value of the gross assets of Premier
immediately prior to the Closing Date, with such amount determined
based on the same methodology described in Section 5.8(d) other
than the amounts described in Section 9.1.
19. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND
PREMIER AND PDM
The obligations of the Stockholders and of Premier and PDM with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of all of the
following conditions, except that no such waiver shall be deemed to affect
the survival of the representations and warranties of FYI and Newco
contained in Section 6 hereof.
19.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. All of the representations and warranties of FYI and Newco
contained in this Agreement shall be true and correct as of the Closing
Date; and each and all of the terms, covenants and conditions of this
Agreement to be complied with and performed by FYI and Newco on or before
the Closing Date shall have been duly complied with and performed.
19.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and
all other related legal matters shall be reasonably satisfactory to each
of Premier, PDM and the Stockholders and their respective counsel.
19.3 NO LITIGATION. No action or proceeding before a court or
any other Agency shall have been instituted or threatened to restrain or
prohibit the mergers of Newco with Premier and PDM and no Agency shall
have taken any other action or made any request of Premier or PDM as a
result of which the management of Premier or PDM deems it inadvisable to
proceed with the transactions hereunder.
19.4 OPINION OF COUNSEL. Premier and PDM and the Stockholders
shall have received an opinion from Locke Purnell Rain Harrell (A
Professional Corporation), counsel for FYI, dated the Closing Date, in the
form annexed hereto as Annex IV.
19.5 EMPLOYMENT AGREEMENTS. Newco shall have executed and
delivered to Brian E. Whiteside, Lynnette C. Pomerville, Christopher S.
Moore and Gary T. Sievert
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Employment Agreements in substantially the form attached hereto as Annex V
(the "Employment Agreements").
19.6 CONSENTS AND APPROVALS. All necessary consents of and
filings with any Agency relating to the consummation of the transactions
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or
prohibit the Merger and no Agency shall have taken any other action or
made any request of Premier or PDM as a result of which either Premier or
PDM deems it inadvisable to proceed with the transactions hereunder.
19.7 GOOD STANDING CERTIFICATES. FYI and Newco each shall
have delivered to Premier and to PDM a certificate, dated as of a date not
more than fifteen (15) days prior to the Closing Date, duly issued by the
Delaware Secretary of State and in each state in which FYI or Newco is
authorized to do business, showing that each of FYI and Newco is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for FYI and Newco, respectively, for all
periods prior to the Closing have been filed and paid.
19.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance
shall have occurred that would constitute an FYI Material Adverse Effect.
20. CONDITIONS PRECEDENT TO OBLIGATIONS OF FYI AND NEWCO
The obligations of FYI and Newco with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions, except that
no such waiver shall be deemed to affect the survival of the
representations and warranties of Premier, PDM and the Stockholders
contained in Section 5 hereof.
20.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. All of the representations and warranties of the
Stockholders and Premier and PDM contained in this Agreement shall be true
and correct as of the Closing Date; and each and all of the terms,
covenants and conditions of this Agreement to be complied with and
performed by the Stockholders and Premier and PDM on or before the Closing
Date shall have been duly complied with and performed.
20.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and
all other related legal matters shall be reasonably satisfactory to each
of FYI and Newco and their counsel.
20.3 NO LITIGATION. No action or proceeding before a court or
any other Agency shall have been instituted or threatened to restrain or
prohibit the mergers of Premier and PDM with and into Newco and no Agency
shall have taken any other action or made any
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<PAGE> 36
request of FYI as a result of which the management of FYI or Newco deems
it inadvisable to proceed with the transactions hereunder.
20.4 EXAMINATION OF FINAL FINANCIAL STATEMENTS. Prior to the
Closing Date, FYI shall have had sufficient time to review the unaudited
balance sheets of Premier and of PDM for the fiscal quarter ended March
31, 1996, and the unaudited statements of income, cash flows and retained
earnings of each of Premier and PDM for the fiscal month ended April 30,
1996, disclosing no material adverse change in the financial condition
thereof, or the results of its operations from the financial statements as
of December 31, 1995.
20.5 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date,
the Stockholders shall have repaid Premier and PDM in full all amounts
owing by the Stockholders to Premier and PDM.
20.6 INSURANCE. FYI shall be named as an additional named
insured on all of the insurance policies of Premier and of PDM.
20.7 STOCKHOLDER RELEASES. Each of the Stockholders shall
have delivered to FYI immediately prior to the Closing Date an instrument
dated the Closing Date in substantially the form of Annex VI releasing
Premier and PDM from any and all claims of the Stockholder against Premier
and PDM and obligations of Premier and PDM to the Stockholder, except for
items specifically identified on Schedule 8.7 as being claims of or
obligations to the Stockholder and continuing obligations to Stockholder
relating to his employment by the Surviving Corporation.
20.8 TERMINATION OF RELATED PARTY AGREEMENTS. All existing
agreements between Premier and PDM and the Stockholders or business or
personal affiliates of Premier and PDM or the Stockholders and all
existing bonus and incentive plans and arrangements of Premier and PDM,
other than those set forth on Schedule 8.8, shall have been cancelled or
terminated.
20.9 TERMINATION OF PENSION PLAN. Premier shall have
delivered evidence reasonably satisfactory to each of FYI and Newco and
their respective counsel of (i) the termination without penalty, effective
not later than December 31, 1996, of the pension plan of Premier and (ii)
the termination without penalty, effective as of May 31, 1996, of
Premier's employer matching plan.
20.10 OPINIONS OF COUNSEL. FYI shall have received an opinion
from Carr, McClellan, Ingersoll, Thompson & Horn Professional Corporation,
counsel to Premier, PDM and Brian E. Whiteside, dated the Closing Date, in
the form annexed hereto as Annex VII as to matters of California law, and
the opinion of David J. Smith, Washington
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counsel to Premier, PDM and Brian E. Whiteside, dated the Closing Date, in
the form annexed hereto as Annex VII as to the matters of Washington law.
20.11 EMPLOYMENT AGREEMENTS. Brian E. Whiteside, Lynnette C.
Pomerville, Christopher S. Moore and Gary T. Sievert shall have executed
and delivered to FYI and Newco the Employment Agreements.
20.12 NONCOMPETITION AGREEMENTS. Each of the Stockholders
shall have executed and delivered to FYI and Newco a Noncompetition
Agreement with FYI and Newco in substantially the form attached hereto as
Annex VIII (the "Noncompetition Agreement"), except that the term of the
covenants contained in the Noncompetition Agreements for the Stockholders
other than Brian E. Whiteside shall be three (3) years.
20.13 LOCK-UP AGREEMENTS. Each of the Stockholders shall have
executed and delivered to FYI and Newco a Lock-Up Agreement in
substantially the form annexed hereto as Annex IX (the "Lock-Up
Agreement") with respect to the shares of FYI Stock to be acquired thereby
pursuant to Section 2 hereof containing the Stockholder's undertakings as
set forth in Section 11.1 hereof.
20.14 CONSENTS AND APPROVALS. All necessary consents of and
filings with any Agency relating to the consummation of the transactions
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or
prohibit the Merger and no Agency shall have taken any other action or
made any request of FYI or Newco as a result of which either FYI or Newco
deems it inadvisable to proceed with the transactions hereunder.
20.15 GOOD STANDING CERTIFICATES. Each of Premier and PDM
shall have delivered to FYI a certificate, dated as of a date not more
than fifteen (15) days prior to the Closing Date, duly issued by the
appropriate governmental authority in the state of incorporation of
Premier and of PDM and in each state, if any, in which Premier and PDM is
authorized to do business, showing that Premier and PDM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for all periods prior to the Closing have
been filed and paid.
20.16 NO MATERIAL ADVERSE EFFECT. No event or circumstance
shall have occurred that would constitute a Material Adverse Effect.
21. COVENANTS OF THE PARTIES
21.1 PERMITTED PAYMENTS OF COMPENSATION BY PREMIER AND PDM.
Each of FYI and Newco acknowledges and agrees that prior to the Effective
Time of the Merger, Premier and PDM may pay in a manner consistent with
their past business practices, compensation for services consisting of
bonuses to the Stockholders or their employees not
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to exceed (in the aggregate) the sum of $225,000. The parties to this
Agreement further acknowledge and agree that each of Premier and PDM shall
retain and shall not distribute to the Stockholders any amounts after the
date of this Agreement.
21.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT.
(a) After the Closing Date, FYI shall not and shall
not permit any of the FYI Subsidiaries to undertake any act that
would jeopardize the tax-free status of the reorganization of
Premier, including
(i) The retirement or reacquisition,
directly or indirectly, of all or part of the FYI Stock
issued in connection with the transactions contemplated
hereby;
(ii) The entering into of financial
arrangements for the benefit of the Stockholders in their
capacities as such;
(iii) The disposition of any material part of
the assets of Premier within the two (2) years following
the Closing Date except in the ordinary course of
business or to eliminate duplicate services or excess
capacity;
(iv) The discontinuance of the historic
business of Premier; and
(v) The issuance of additional shares of
Newco stock that would result in FYI losing control of
Newco within the meaning of Section 368(c) of the Code.
(b) Until December 31, 1997 FYI shall maintain the
separate corporate existence of the Surviving Corporation and
shall operate the business of Premier and PDM acquired by the
Surviving Corporation as a result of the Merger within the
Surviving Corporation and shall maintain separate books of account
and records therefor in order to calculate accurately the Earnout
described in Annex IIA. Until January 1, 1997 no FYI overhead or
other FYI expenses shall be paid by the Surviving Corporation.
21.3 PREPARATION AND FILING OF TAX RETURNS.
(a) Each party hereto shall, and shall cause its
subsidiaries and affiliates to, provide to each of the other
parties hereto such cooperation and information as any of them
reasonably may request in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include
providing copies of all relevant portions of relevant
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returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or
other determinations by taxing authorities and relevant records
concerning the ownership and tax basis of property, which such
party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject
to the preceding sentence, each party required to file returns
pursuant to this Agreement shall bear all costs of filing such
returns.
(b) Each of the Premier, PDM, Newco, FYI and the
Stockholders shall comply with the tax reporting requirements of
Section 1.368-3 of the Treasury Regulations promulgated under the
Code, and shall treat the transaction as a tax-free reorganization
under Section 368(a) of the Code unless otherwise required by law.
21.4 COVENANTS OF PDM CONCERNING TERMINATION OF S ELECTION.
(a) Definitions. The following terms, as used herein, have
the following meanings when used hereinafter:
"C Corporation Period" means the period commencing on the S
Termination Date.
"C Short Year" means that portion of the S Termination Year of PDM
as defined in Section 1362(e)(1)(B) of the Code.
"S Corporation Period" means, as to PDM the period commencing on
the effective date of its S election and ending on the date immediately
preceding the S Termination Date.
"S Corporation Taxable Income" means the taxable income of PDM
from all sources during the S Corporation Period.
"S Short Year" means that portion of the S Termination Year of PDM
as defined in Section 1362(e)(1)(A) of the Code.
"S Termination Date" means the date on which the S corporation
status of PDM is terminated pursuant to Section 1362(d)(2) of the Code.
"S Termination Year" has the meaning set forth in Section
1362(e)(4) of the Code.
(b) Termination of S Election; S Termination Year
(i) Termination of S Status. PDM made a valid
election under Section 1362(a) of the Code to be taxed in accordance with
the provisions of Subchapter S of the
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Code for its initial tax year beginning October 7, 1993 and ending
December 31, 1993 (the "S Election"). The PDM Stockholder acknowledges
that the Merger will terminate PDM's S election pursuant to Section
1362(d)(2) of the Code.
(ii) Effective Date. The S Termination Date shall be
on the date of the Effective Time of the Merger.
(iii) S Termination Year. The fiscal year in which the
S corporation status of PDM is terminated will be an S Termination Year
with respect to PDM for federal income tax purposes, as defined in Section
1362(e)(4) of the Code.
(iv) S Short Year. Pursuant to Section 1362(e)(1)(A)
of the Code, the S Termination Year of PDM shall be divided into two short
taxable years: an S Short Year and a C Short Year. As defined in Section
1362(e)(1)(A) of the Code, the S Short Year of PDM shall be that portion
of its S Termination Year beginning on the initial day of its fiscal year
and ending on the day immediately preceding the S Termination Date. For
federal income tax purposes, PDM will be treated as an S corporation
during its S Short Year.
(v) C Short Year. Pursuant to Section 1362(e)(1)(B)
of the Code, the portion of the S Termination Year beginning on the S
Termination Date and ending on the last day of the fiscal year, shall be
the C Short Year of PDM. For federal income tax purposes, PDM will be
taxed as a C corporation during the C Short Year.
(c) Allocation of Income
(i) Allocation Election. Tax items shall be
allocated to the S Short Year and the C Short Year pursuant to normal tax
accounting rules (that is, the "closing of the books method") rather than
by the pro rata allocation method contained in Section 1362(e)(2) of the
Code.
(ii) Filing of Tax Returns. In respect to the
foregoing allocation, PDM shall cause to be prepared, at its expense, and
shall timely file all tax returns required by federal, state and local law
and, when appropriate, shall allocate the tax items to the S Short Year
and the C Short Year pursuant to normal tax accounting rules (that is, the
"closing of the books method") rather than the pro rata allocation method
contained in Section 1362(e)(2) of the Code.
(d) Taxes
(i) Liability for Taxes Incurred During S Corporation
Years Including S Short Year. The PDM Stockholder shall pay (and shall
indemnify, defend and hold harmless the Surviving Corporation from and
against liability with respect to) any and all
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Taxes that are imposed on him or PDM and attributable to the taxable
income of PDM, including but not limited to, any taxable income of PDM
recognized as a result of the Merger of PDM into Newco for all taxable
periods (or that portion of any period including the S Short Year) during
which PDM was an S corporation. The PDM Stockholder shall pay any and all
Taxes that are imposed on him and/or PDM as a result of PDM's S election
being treated as invalid or ineffective for any reason or such election
being revoked or terminated prior to the S Termination Date.
(ii) Liability for Taxes Incurred During C Corporation
Years Including C Short Year. The Surviving Corporation shall pay or
cause to be paid (and shall indemnify, defend and hold harmless the PDM
Stockholder from and against liability with respect to) any and all Taxes
attributable to the taxable income of the Surviving Corporation for the C
Corporation Period. In no event will the Surviving Corporation be
required to pay any Taxes that are imposed upon PDM as a result of the
Merger of PDM into Newco.
(e) If the PDM Stockholder receives notice of an intention by
a taxing authority to audit any return of the PDM Stockholder that
includes any item of income, gain, deduction, loss or credit reported by
PDM with respect to the S Corporation Period that the PDM Stockholder has
reason to believe may affect the Surviving Corporation's tax returns
during the C Corporation Period, the PDM Stockholder shall inform the
Surviving Corporation, in writing, of the audit promptly after receipt of
such notice. If the PDM Stockholder receives notice from a taxing
authority of any proposed adjustment for which the Surviving Corporation
may be required to indemnify hereunder (a "Proposed Adjustment"), the PDM
Stockholder shall give notice to the Surviving Corporation of the Proposed
Adjustment promptly after receipt of such notice from a taxing authority.
Upon receipt of such notice from the PDM Stockholder, the Surviving
Corporation may request that the PDM Stockholder contest such Proposed
Adjustment and the PDM Stockholder shall permit the Surviving Corporation
to participate in (but not to control) such proceedings. If the Surviving
Corporation requests that any Proposed Adjustment be contested, then the
PDM Stockholder shall, at the Surviving Corporation's expense, contest the
Proposed Adjustment or at the option of the Surviving Corporation permit
the Surviving Corporation to contest the Proposed Adjustment (including
pursuing all administrative and judicial appeals and processes). The
Surviving Corporation shall pay to the PDM Stockholder all reasonable
costs and expenses (including reasonable attorneys' and accountants' fees)
that the PDM Stockholder may incur in contesting such Proposed
Adjustments. The PDM Stockholder shall not make, accept or enter into a
settlement or other compromise, with respect to any Taxes indemnified
hereunder, or forego or terminate any proceeding undertaken hereunder
without the consent of the Surviving Corporation, which consent shall not
be unreasonably withheld. The PDM Stockholder will reasonably assist if
the Surviving Corporation contests any Proposed Adjustment.
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(f) If the Surviving Corporation receives notice of an
intention by a taxing authority to audit any return of the Surviving
Corporation that includes any item of income, gain, deduction, loss or
credit reported by the Surviving Corporation with respect to the period
after the Merger during which the Surviving Corporation is a C corporation
that the Surviving Corporation has reason to believe may affect the PDM
Stockholder's tax returns during the S Corporation Period, the Surviving
Corporation shall inform the PDM Stockholder in writing, of the audit
promptly after receipt of such notice. If the Surviving Corporation
receives notice from a taxing authority of any proposed adjustment for
which the PDM Stockholder may be required to indemnify the Surviving
Corporation hereunder (a "Surviving Corporation Proposed Adjustment"), the
Surviving Corporation shall give notice to the PDM Stockholder of the
Surviving Corporation Proposed Adjustment promptly after receipt of such
notice from a taxing authority. Upon receipt of such notice from the
Surviving Corporation, the PDM Stockholder may, by in turn giving prompt
written notice to the Surviving Corporation, request that the Surviving
Corporation contest such Surviving Corporation Proposed Adjustment. If
the PDM Stockholder requests that any Surviving Corporation Proposed
Adjustment be contested, then the Surviving Corporation shall contest the
Surviving Corporation Proposed Adjustment (including pursuing all
administrative and judicial appeals and processes) at the PDM
Stockholder's expense and shall permit the PDM Stockholder to participate
in (but not to control) such proceeding.
(g) The Surviving Corporation and the PDM Shareholder shall
cooperate fully with each other in all matters relating to Taxes and in
the determination of amounts payable hereunder. In the case of
disagreement as to the course of action to be pursued in dealing with
taxing authorities (including, without limitation, matters with respect to
preparation and filing of tax returns, conduct of audits, and proceedings
in courts), the decision of the party (the Surviving Corporation, on the
one hand, or the PDM Stockholder, on the other hand) who will economically
benefit from or be burdened by the course of action (or in the case both
parties benefit and/or are burdened, the decision of the party with the
greatest benefit or burden) shall control.
21.5 STOCK OPTIONS. Promptly after the Effective Time of the
Merger, FYI shall grant to employees of the Surviving Corporation as
selected by Brian E. Whiteside nonqualified stock options to acquire an
aggregate of twenty thousand (20,000) shares of FYI Stock in accordance
with the terms of the FYI 1995 Stock Option Plan (the "Stock Option
Plan"). Such stock options shall have a per share exercise price equal to
the Fair Market Value (as defined in the Stock Option Plan) per share on
the date of the Closing and shall vest and become exercisable in
twenty-five percent (25%) increments on the date of grant and on each of
the first through third anniversaries thereof in accordance with the
procedural terms set forth on the Stock Option Plan.
22. INDEMNIFICATION
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The Stockholders, FYI and Newco each make the following covenants
that are applicable to them, respectively. It is understood and agreed
that references to the Company shall mean Premier with respect to the
Premier Stockholders and shall mean PDM with respect to the PDM
Stockholder.
22.1 FYI LOSSES.
(a) (i) Each of the Stockholders severally in respect
of their respective representations and warranties in Section 5(B), (ii)
Brian E. Whiteside in respect of the representations and warranties in
Section 5(A) and in respect of items (b), (c) and (d) below in this
Section 10.1(a), agrees to indemnify and hold harmless FYI, Newco and the
Surviving Corporation, and their respective directors, officers,
employees, representatives, agents and attorneys from, against and in
respect of any and all FYI Losses (as defined below) suffered, sustained,
incurred or required to be paid by any of them by reason of (a) any
representation or warranty made by the Company or the Stockholders in or
pursuant to this Agreement (including, without limitation, the
representations and warranties contained in any certificate delivered
pursuant hereto) being untrue or incorrect in any respect; (b) any
liability for warranty claims arising from the sale of goods or services
by the Company through the Closing Date; (c) the termination of or
withdrawal by the Company or any Group Member from any employee pension
benefit plan, as defined in Section 3(2)(A) of ERISA that is maintained
pursuant to a collective bargaining agreement under which more than one
employer makes contributions and to which the Company or any Group Member
is then making or accruing an obligation to make contributions or has
within the preceding five (5) plan years made contributions; or (d) the
items described in Schedule 5.16 hereof, except in any instance and to the
extent FYI Losses result from the negligence or misconduct of FYI, Newco
or the Surviving Corporation. Brian E. Whiteside shall indemnify and hold
harmless FYI, Newco and the Surviving Corporation, and their respective
representatives, agents and attorneys from, against and in respect of any
and all FYI Losses suffered, sustained, incurred or required to be paid by
them by reason of any failure by the Company and Mr. Whiteside to observe
or perform its or his covenants and agreements set forth in this Agreement
or in any other agreement or document executed by it or him in connection
with the transactions contemplated hereby, and each other Stockholder
shall indemnify and hold harmless on a several basis FYI, Newco and the
Surviving Corporation and their respective directors, officers, employees,
representatives, agents and attorneys from, against and in respect of any
and all FYI Losses suffered, sustained, incurred or required to be paid by
them by reason of any failure by such Stockholder to observe or perform
his or her covenants and agreements set forth in this Agreement or in any
other agreement or document executed by such Stockholder in connection
with the transactions contemplated hereby.
(b) "FYI Losses" shall mean all damages (including,
without limitation, amounts paid in settlement with the Stockholders'
consent, which consent may not be unreasonably withheld), losses,
obligations, liabilities, claims, deficiencies, costs and
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expenses (including, without limitation, reasonable attorneys' fees),
penalties, fines, interest and monetary sanctions, including, without
limitation, reasonable attorneys' fees and costs incurred to comply with
injunctions and other court and Agency orders, and other costs and
expenses incident to any suit, action, investigation, claim or proceeding
or to establish or enforce the rights of FYI, Newco and the Surviving
Corporation or such other persons to indemnification hereunder.
22.2 ENVIRONMENTAL INDEMNITY.
(a) Brian E. Whiteside agrees to indemnify and hold
harmless FYI, Newco and the Surviving Corporation, and their respective
directors, officers, employees, representatives, agents and attorneys
from, against and in respect of any and all Environmental Costs (as
defined below), arising in any manner in connection with: (i) the presence
with the knowledge of the Stockholders at or on any property now or
formerly owned, operated or leased by the Company at the time of the
Company's operation or lease thereof of any Hazardous Substances or the
release, leak, discharge, spill, disposal, migration or emission of
Hazardous Substances from any such property at the time of the Company's
operation or lease thereof; (ii) the failure of the Company to comply with
any applicable Environmental Requirements prior to the Closing Date; or
(iii) the transportation to, disposal at, or migration onto or into
adjacent property or any off-site location of any Hazardous Substances
from property now or formerly owned, operated or leased by the Company at
the time of the Company's operation or lease thereof, whether or not the
transportation or disposal was conducted in full compliance with
Environmental Requirements.
(b) The obligations of this Section 10.2 shall
include the obligation to defend the Indemnified Parties (as defined
below) against any claim or demand for Environmental Costs, the obligation
to pay and discharge any Environmental Costs imposed on Indemnified
Parties, and the obligation to reimburse Indemnified Parties for any
Environmental Costs incurred or suffered, provided in each instance that
the claim for Environmental Costs arises in connection with a matter for
which Indemnified Parties are entitled to indemnification under this
Agreement. The obligation to reimburse the Indemnified Parties shall also
include the costs and expenses (including, without limitation, reasonable
attorneys' fees) to establish or enforce the rights of FYI, Newco and the
Surviving Corporation or such other persons to indemnification hereunder.
(c) "Environmental Costs" shall mean any of the
following that arise in any manner regardless of whether based in
contract, tort, implied or express warranty, strict liability,
Environmental Requirement or otherwise: all liabilities, losses,
judgments, damages, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and fees and disbursements of environmental consultants,
all costs related to the performance of any required or necessary
assessments, investigations, remediation, response, containment, closure,
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restoration, repair, cleanup or detoxification of any impacted property,
the preparation and implementation of any maintenance, monitoring,
closure, remediation, abatement or other plans required by any
governmental agency or by Environmental Requirements and any other costs
recovered or recoverable under any Environmental Requirement), fines,
penalties, or monetary sanctions. Environmental Costs shall include
without limitation: (i) damages for personal injury or death, or injury
to property or to natural resources; (ii) damage to real property or
damage resulting from the loss of the use of all or any part of the
property, including but not limited to business loss; and (iii) the cost
of any demolition, rebuilding or repair of any property required by
Environmental Requirements or necessary to restore such property to its
condition prior to damage caused by an environmental condition or by the
remediation of an environmental condition.
22.3 EMPLOYEE COMPENSATION AND BENEFITS. Brian E. Whiteside
agrees to indemnify and hold FYI, Newco and the Surviving Corporation, and
their respective directors, officers, employees, representatives, agents
and attorneys harmless from and against any and all claims made by
employees of the Company, regardless of when made, for wages, salaries,
bonuses, pension, workmen's compensation, medical insurance, disability,
vacation, severance, pay in lieu of notice, sick benefits or other
compensation or benefit arrangements to the extent the same are based on
employment service rendered to the Company prior to the Closing Date or
injury or sickness occurring prior to the Closing Date and are not
scheduled pursuant to this Agreement or reserved for on the Financial
Statements (collectively, "Employee Claims").
22.4 STOCKHOLDER LOSSES.
(a) FYI and Newco jointly and severally agree to
indemnify and hold harmless the Stockholders, and their respective agents,
and attorneys, for and in respect of any and all Stockholder Losses (as
defined below) suffered, sustained, incurred or required to be paid by any
of the Stockholders by reason of (i) any representation or warranty made
by FYI or Newco in or pursuant to this Agreement (including, without
limitation, the representations and warranties contained in any
certificate delivered pursuant hereto) being untrue or incorrect in any
respect; (ii) any failure by FYI or Newco to observe or perform its
covenants and agreements set forth in this Agreement or any other
agreement or document executed by it in connection with the transactions
contemplated hereby; or (iii) any liability for warranty claims arising
from the sale of goods or services by the Company subsequent to the
Closing Date, except in any instance and to the extent Stockholder Losses
result from the negligence or misconduct of the Stockholders or any of
them (with respect to periods prior to the Closing Date).
(b) "Stockholder Losses" shall mean all damages
(including, without limitation, amounts paid in settlement with the
consent of FYI and Newco, which consent may not be reasonably withheld),
losses, obligations, liabilities, claims, deficiencies, costs and expenses
(including, without limitation, reasonable attorneys' fees), penalties,
fines, interest and monetary sanctions, including, without limitation,
reasonable attorneys' fees
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and costs incurred to comply with injunctions and other court and Agency
orders, and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce the right of
the Stockholders or such other persons to indemnification hereunder.
22.5 INDEMNIFICATION FOR CERTAIN TAX MATTERS. (a) The PDM
Stockholder shall indemnify, defend and hold harmless the Surviving
Corporation from and against the Surviving Corporation's liability with
respect to all Taxes, including without limitation interest and additions
to Taxes, resulting from any final determination (or settlement) that all
or any portion of the S Corporation Taxable Income is taxable to the
Surviving Corporation because the S election was not effective or such S
election was revoked or the S corporation status of the Company was
terminated prior to the S Termination Date.
(b) The Premier Stockholders shall indemnify, defend and hold
harmless the Surviving Corporation from and against the liability of
Premier or the Surviving Corporation with respect to all Taxes, including
interest and additions to Taxes, resulting from any final determination
(or settlement) that the Merger of Premier into Newco fails to qualify as
a tax-free transaction as to Premier and/or the Surviving Corporation
pursuant to Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code as a
result of any breach of a representation, warranty or covenant of the
Premier or a Premier Stockholder. FYI and the Surviving Corporation shall
indemnify, defend and hold harmless the Premier Stockholders from and
against the liability of the Premier Stockholders, Premier and the
Surviving Corporation with respect to all Taxes, resulting from any final
determination (or settlement) that the Merger of Premier into Newco fails
to qualify as a tax-free transaction as to the Premier Stockholders,
Premier and/or the Surviving Corporation pursuant to Section 368(a)(1)(A)
and Section 368(a)(2)(D) of the Code as a result of any breach of a
representation, warranty or covenant by FYI or Newco.
22.6 NOTICE OF LOSS. Except to the extent set forth in the
next sentence, a party to the Agreement will not have any liability under
the indemnity provisions of this Agreement with respect to a particular
matter unless a notice setting forth in reasonable detail the breach or
other matter which is asserted has been given to the Indemnifying Party
(as defined below) and, in addition, if such matter arises out of a suit,
action, investigation, proceeding or claim, such notice is given promptly,
but in any event within thirty (30) days after the Indemnified Party (as
defined below) is given notice of the claim or the commencement of the
suit, action, investigation or proceeding. Notwithstanding the preceding
sentence, failure of the Indemnified Party to give notice hereunder shall
not release the Indemnifying Party from its obligations under this Section
10, except to the extent the Indemnifying Party is actually prejudiced by
such failure to give notice. With respect to FYI Losses, Environmental
Costs, Employee Claims and the matters described in Section 10.5, Brian E.
Whiteside and the other Premier Stockholders (to the extent set forth in
Section 10.1(a)) shall be the Indemnifying Party and FYI and Newco and
their respective directors, officers, employees, representatives, agents
and attorneys shall be the
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Indemnified Parties. With respect to Stockholder Losses and the matters
described in the second sentence of Section 10.5(b), FYI and Newco shall
be the Indemnifying Party and the Stockholders and their respective agents
and attorneys shall be the Indemnified Party.
22.7 RIGHT TO DEFEND. Upon receipt of notice of any suit,
action, investigation, claim or proceeding for which indemnification might
be claimed by an Indemnified Party, the Indemnifying Party shall be
entitled to defend, contest or otherwise protect against any such suit,
action, investigation, claim or proceeding at its own cost and expense,
and the Indemnified Party must cooperate in any such defense or other
action. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in defense thereof by
counsel of its own choosing, but the Indemnifying Party shall be entitled
to control the defense unless the Indemnified Party has relieved the
Indemnifying Party from liability with respect to the particular matter or
the Indemnifying Party fails to assume defense of the matter. In the
event the Indemnifying Party shall fail to defend, contest or otherwise
protect in a timely manner against any such suit, action, investigation,
claim or proceeding, the Indemnified Party shall have the right, but not
the obligation, thereafter to defend, contest or otherwise protect against
the same and make any compromise or settlement thereof and recover the
entire cost thereof from the Indemnifying Party including, without
limitation, reasonable attorneys' fees, disbursements and all amounts paid
as a result of such suit, action, investigation, claim or proceeding or
the compromise or settlement thereof; provided, however, that the
Indemnified Party must send a written notice to the Indemnifying Party of
any such proposed settlement or compromise, which settlement or compromise
the Indemnifying Party may reject, in its reasonable judgment, within
thirty (30) days of receipt of such notice. Failure to reject such notice
within such thirty (30) day period shall be deemed an acceptance of such
settlement or compromise. The Indemnified Party shall have the right to
effect a settlement or compromise over the objection of the Indemnifying
Party; provided, that if (i) the Indemnifying Party is contesting such
claim in good faith or (ii) the Indemnifying Party has assumed the defense
from the Indemnified Party, the Indemnified Party waives any right to
indemnity therefor. If the Indemnifying Party undertakes the defense of
such matters, the Indemnified Party shall not, so long as the Indemnifying
Party does not abandon the defense thereof, be entitled to recover from
the Indemnifying Party any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof other than
the reasonable costs of investigation undertaken by the Indemnified Party
with the prior written consent of the Indemnifying Party.
22.8 COOPERATION. Each of FYI, Newco, the Surviving
Corporation, the Company and the Stockholders, and each of their
affiliates, successors and assigns shall cooperate with each other in the
defense of any suit, action, investigation, proceeding or claim by a third
party and, during normal business hours, shall afford each other access to
their books and records and employees relating to such suit, action,
investigation, proceeding or claim and shall furnish each other all such
further information that they have the right and power to furnish as may
reasonably be necessary to defend such suit, action,
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investigation, proceeding or claim, including, without limitation,
reports, studies, correspondence and other documentation relating to
Environmental Protection Agency, Occupational Safety and Health
Administration, and Equal Employment Opportunity Commission matters.
22.9 SATISFACTION OF CLAIMS FROM ESCROW. FYI and Newco shall
have the option of recovering amounts owing thereto pursuant to Sections
10.1, 10.2 and 10.3 for FYI Losses, Environmental Costs and Employee
Claims from the Stockholders or from the funds held by it as described in
Section 3.1(a).
22.10 LIMITATIONS OF INDEMNIFICATION; PROPORTIONATE PAYMENTS.
FYI, Newco, the Surviving Corporation and the other persons or entities
indemnified pursuant to Sections 10.1, 10.2 and 10.3 shall not assert any
claim for indemnification hereunder until such time as and solely to the
extent that the aggregate of all claims that such persons may have against
the Indemnifying Parties shall exceed $5,000.00 with respect to a single
claim or $25,000.00 with respect to all claims. Any amounts paid to
Premier and/or PDM pursuant to this Section 10 shall be paid in the same
proportion of FYI Stock, valued at the then-fair market value thereof, and
cash as set forth on Annex IIA or IIB, as the case may be.
23. SECURITIES ACT REPRESENTATIONS AND TRANSFER RESTRICTIONS
The FYI Stock acquired by the Stockholders pursuant to this
Agreement is being acquired solely for their own accounts, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
23.1 TRANSFER RESTRICTIONS. For a period of two (2) years
from the Closing, no Stockholder shall (a) sell, assign, exchange,
transfer, encumber, pledge, distribute or otherwise dispose of (i) any
shares of FYI Stock received by the Stockholder at the Effective Time of
the Merger, or (ii) any interest (including, without limitation, an option
to buy or sell) in any such shares of FYI Stock, in whole or in part, and
no such attempted transfer shall be treated as effective for any purpose;
or (b) engage in any transaction, whether or not with respect to any
shares of FYI Stock or any interest therein, the intent or effect of which
is to reduce the risk of owning the shares of FYI Stock acquired pursuant
to Section 2 hereof (including, by way of example and not limitation,
engaging in put, call, short-sale, straddle or similar market
transactions). The certificates evidencing the FYI Stock delivered to the
Stockholders pursuant to Section 3 of this Agreement will bear a legend
substantially in the form set forth below and containing such other
information as FYI may deem necessary or appropriate:
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THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
ENCUMBRANCE, PLEDGE, DISTRIBUTION OR OTHER DISPOSITION
PRIOR TO THE SECOND ANNIVERSARY OF THE CLOSING DATE.
UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) AFTER THE DATE SPECIFIED ABOVE.
Each of the Stockholders will execute and deliver to FYI prior to or at
the Closing a Lock-Up Agreement containing the foregoing agreements. The
agreements in this Section 11.1 and in the Lock-Up Agreement shall not
apply to the FYI Stock, if any, to be received by the Stockholders
pursuant to the Earnout (as defined in Annex IIA).
24. GENERAL
24.1 COOPERATION. Premier, PDM, the Stockholders, FYI and
Newco shall each deliver or cause to be delivered to the other on the
Closing Date, and at such other times and places as shall be reasonably
agreed to, such additional instruments as the other may reasonably request
for the purpose of carrying out this Agreement. Each of Premier and PDM
will cooperate and use its reasonable efforts to have the present
officers, directors and employees thereof cooperate with FYI on and after
the Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any Tax return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
24.2 SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES.
(a) Covenants and Agreements. All covenants and
agreements made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing and shall
continue in full force and effect thereafter according to their terms
without limit as to duration.
(b) Representations and Warranties. All
representations and warranties contained herein shall survive the Closing
and shall continue in full force and effect thereafter for a period of two
(2) years following the Closing, except that (a) the representations and
warranties contained in Section 5.8 and Section 6.12 hereof shall survive
until the earlier of (i) the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation
applicable to the payment of the Taxes to which such representations and
warranties relate without an assertion of a deficiency in
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respect thereof by the applicable taxing authority or (ii) the completion
of the final audit and determinations by the applicable taxing authority
and final disposition of any deficiency resulting therefrom, (b) the
representations and warranties contained in Section 5.19 shall survive
until the expiration of the applicable period of the statutes of
limitation applicable to ERISA matters, and (c) the representations and
warranties contained in Sections 5.1, 5.2 and 5.3 and Sections 6.1, 6.2,
6.3 and 6.4 shall survive indefinitely.
24.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation of law) and
shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of FYI, and the heirs and legal representatives of
the Stockholders.
24.4 ENTIRE AGREEMENT. This Agreement (including the
schedules, exhibits and annexes attached hereto) and the documents
delivered pursuant hereto constitute the entire agreement and
understanding among the Stockholders, Premier, PDM, Newco and FYI, and
supersede any prior agreement and understanding relating to the subject
matter of this Agreement. This Agreement, upon execution, constitutes a
valid and binding agreement of the parties hereto enforceable in
accordance with its terms and this Agreement and the Annexes hereto may be
modified or amended only by a written instrument executed by the
Stockholders, Premier, PDM, Newco and FYI, acting through their respective
officers, duly authorized by their respective Boards of Directors.
24.5 COUNTERPARTS. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be
deemed an original and all of which together shall constitute but one and
the same instrument.
24.6 BROKERS AND AGENTS. Except as disclosed on Schedule
12.6, each party represents and warrants that it employed no broker or
agent in connection with this transaction and agrees to indemnify the
other against all loss, cost, damages or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by
such indemnifying party.
24.7 EXPENSES. Whether or not the transactions herein
contemplated shall be consummated, (i) FYI and Newco will pay the fees,
expenses and disbursements of FYI and Newco and their respective agents,
representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all
costs and expenses incurred in the performance and compliance with all
conditions to be performed by FYI under this Agreement, and (ii) the
Stockholders will pay from personal funds and not from the funds of
Premier or PDM, the fees, expenses and disbursements of its counsel
incurred in connection with the subject matter of this Agreement after
April 30, 1996 and not booked prior to May 1, 1996. The Stockholders
acknowledge that they, and not the Company or FYI, will pay all taxes due
upon receipt of the consideration payable to the Stockholders pursuant to
Section 2 hereof.
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24.8 NOTICES. All notices of communication required or
permitted hereunder shall be in writing and may be given by (a) depositing
the same in United States mail, addressed to the party to be notified,
postage prepaid and registered or certified with return receipt requested,
(b) delivering the same in person to an officer or agent of such party, or
(c) telecopying the same with electronic confirmation of receipt.
(i) If to FYI or Newco, addressed to them at:
F.Y.I. Incorporated
Premier Acquisition Corp.
3232 McKinney Avenue, Suite 900
Dallas, Texas 75204
Telecopy No.: (214) 953-7556
Attn: Margot T. Lebenberg, Esq.
with copies to:
Locke Purnell Rain Harrell
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy No.: (214) 740-8800
Attn: Charles C. Reeder, Esq.
(ii) If to the Stockholders, addressed thereto at the
address set forth on Annex I, with copies
to such counsel as is set forth with respect to
the Stockholders on such Annex I;
(iii) If to Premier or PDM, addressed to:
Premier Document Management, Inc.
PDM Services, Inc.
1201 4th Avenue S, Suite 202
Seattle, Washington 98134
Telecopy No.: (206) 340-9031
Attn: Brian E. Whiteside
and marked "Personal and Confidential"
-45-
<PAGE> 52
with copies to:
Carr, McClellan, Ingersoll, Thompson & Horn
Professional Corporation
216 Park Road
Burlingame, California 94010
Telecopy No.: (415) 342-7685
Attn: Mark A. Cassanego, Esq.
L. Michael Telleen, Esq.
or to such other address or counsel as any party hereto shall specify
pursuant to this Section 12.8 from time to time.
24.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
24.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
provided herein, no delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any breach or default
by any other party under this Agreement shall impair any such right, power
or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default occurring before or after that
waiver.
24.11 TIME. Time is of the essence with respect to this
Agreement.
24.12 REFORMATION AND SEVERABILITY. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to
the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and
if such modification is not possible, such provision shall be severed from
this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
24.13 REMEDIES CUMULATIVE. No right, remedy or election given
by any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law
or in equity.
24.14 CAPTIONS. The headings of this Agreement are inserted
for convenience only, shall not constitute a part of this Agreement or be
used to construe or interpret any provision hereof.
-46-
<PAGE> 53
24.15 MODIFICATION. It is the intent of the parties that the
Premier transaction be structured as a tax- free reorganization under
Section 368(a) of the Code.
-47-
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
F.Y.I. INCORPORATED
By: /s/ ED H. BOWMAN, JR.
-------------------------------
Name: Ed H. Bowman, Jr.
Title: President
PREMIER ACQUISITION CORP.
By: /s/ DAVID LOWENSTEIN
-------------------------------
Name: David Lowenstein
Title: Vice President
PREMIER DOCUMENT MANAGEMENT, INC.
By: /s/ BRIAN WHITESIDE
-------------------------------
Name: Brian Whiteside
Title: President
PDM SERVICES, INC.
By: /s/ BRIAN WHITESIDE
-------------------------------
Name: Brian Whiteside
Title: President
-48-
<PAGE> 55
THE STOCKHOLDERS:
PDM STOCKHOLDER:
/s/ BRIAN E. WHITESIDE
---------------------------------------
Brian E. Whiteside
PREMIER STOCKHOLDERS:
/s/ BRIAN E. WHITESIDE
---------------------------------------
Brian E. Whiteside
/s/ CHRISTOPHER S. MOORE
---------------------------------------
Christopher S. Moore
/s/ LYNNETTE C. POMERVILLE
---------------------------------------
Lynnette C. Pomerville
/s/ GARY T. SIEVERT
---------------------------------------
Gary T. Sievert
-49-
<PAGE> 56
SPOUSES' CONSENT
The undersigned, the spouses of the above-listed Stockholders, do
hereby consent to the execution and performance of this Agreement by their
respective spouses with respect to any community property interest that
the undersigned may have in the stock of Premier Document Management, Inc.
or PDM Services, Inc.
/s/ CYNTHIA A. WHITESIDE /s/ WILLIAM POMERVILLE
- ------------------------------- -------------------------------
Cynthia A. Whiteside William Pomerville
/s/ PAMELA S. RUSSELL
- -------------------------------
Pamela S. Russell
-50-
<PAGE> 57
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
<TABLE>
<CAPTION>
STOCKHOLDERS OF PREMIER:
-----------------------
Name and Address Number of Shares of Premier Stock Date of Acquisition
---------------- ---------------------------------- -------------------
<S> <C> <C>
Brian E. Whiteside 18,200 September 1, 1984
15643 SE 42nd Court and December 31,
Bellevue, Washington 98006 1992
Christopher S. Moore 600 December 31, 1992
520 Second Avenue W., #208
Seattle, Washington 98119
Lynnette C. Pomerville 600 December 31, 1992
12605 E. Gibson Road, #66
Everett, Washington 98204
Gary T. Sievert 600 December 31, 1992
3223 NE 104th Street
Seattle, Washington 98125
STOCKHOLDERS OF PDM:
-------------------
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
Name and Address Number of Shares of PDM Stock Date of Acquisition
---------------- ----------------------------- -------------------
<S> <C> <C> <C>
Brian E. Whiteside 100,000 October 7, 1993
15643 SE 42nd Court
Bellevue, Washington 98006
</TABLE>
<PAGE> 59
ANNEX IIA
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
Aggregate consideration to be paid to the Premier Stockholders:
Cash - $858,850 ($42.94 per share of Premier Stock),
including $200,000 of such amount to be held by the
Surviving Corporation pursuant to Section 3.1(a) hereof.
Stock - 69,919 shares of FYI Stock (and cash in the
amount of $47.30 in lieu of fractional shares), where the
market value of the FYI Stock shall be deemed to be
$17.25, which constitutes the lowest closing price for
the FYI Stock as reported by the Nasdaq National Market
System for the period from April 17, 1996 to the third
trading day preceding (and not including) the date of the
Closing.
Earnout - A "growth" earnout (the "Earnout") equal to
750% of the amount which the Surviving Corporation's
earnings before interest, taxes, depreciation and
amortization ("EBITDA") is in excess of the following
target for the specified 8-month period:
<TABLE>
<CAPTION>
For the Eight-Month Period
EBITDA Target Ending Dec. 31,
------------- ---------------------------
<S> <C>
$406,000 1996
</TABLE>
; provided, however, in no event may the Earnout amount
exceed $6,000,000.
In the event that the eight-month capital
expenditures of the Surviving Corporation are in excess
of $75,000, the Earnout EBITDA
<PAGE> 60
target will be increased by an amount equal to the amount
of eight-month capital expenditures in excess of $75,000
times 15%. For purposes of calculating EBITDA during the
Earnout period, neither the severance payments to
employees of the Surviving Corporation up to $10,000 nor
the $225,000 payment of compensation described in Section
9.1 shall be considered as an expense. For purposes of
these calculations, the Surviving Corporation's EBITDA
and capital expenditures shall be deemed to include the
aggregate EBITDA and capital expenditures of Premier and
PDM for the period May 1, 1996 through December 31, 1996.
Payment of the Earnout, if earned, will be made
by delivery on March 1, 1997 of not more than 49% of the
aggregate Earnout payment in cash payable to the
Stockholders, with the balance payable by delivery of FYI
Stock on such date valued at the lowest simple average
closing price thereof for any ten consecutive business
day period between December 1, 1996 and February 28, 1997
on the Nasdaq National Market System. Accordingly, the
maximum number of shares of FYI Stock that may be issued
to the Premier Stockholders pursuant to the Earnout may
not exceed that whole number of shares of FYI Stock
having a market value equal to $3,060,000. After
calculation of the Earnout, the Surviving Corporation
shall provide the Stockholders with copies of all
workpapers and other relevant documents to verify the
calculation of the Earnout.
FYI agrees that subsequent to the Closing Date
and until the expiration of the period of the Earnout, it
shall maintain the separate corporate existence of the
Surviving Corporation and shall operate the Surviving
Corporation as a wholly-owned subsidiary of FYI with
separate books of account and records as shall be
necessary to calculate the Earnout.
No Premier Stockholder shall sell, assign,
exchange or otherwise transfer its rights to the Earnout
amount, in whole or in part, and any such attempted
transfer shall be treated as effective for any purpose.
<PAGE> 61
ANNEX IIB
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
Aggregate consideration to be paid to the PDM Stockholder:
Cash - $300,000 ($3.00 per share of PDM Stock).
<PAGE> 62
ANNEX III
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
FYI CHARTER DOCUMENTS
<PAGE> 63
ANNEX IV
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
OPINION OF COUNSEL TO FYI AND NEWCO
<PAGE> 64
ANNEX V
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
EMPLOYMENT AGREEMENT
<PAGE> 65
ANNEX VI
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
STOCKHOLDER RELEASE
<PAGE> 66
ANNEX VII
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
OPINION OF COUNSEL TO PREMIER AND PDM
<PAGE> 67
ANNEX VIII
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
NONCOMPETITION AGREEMENT
<PAGE> 68
ANNEX IX
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BY AND AMONG
F.Y.I. INCORPORATED
PREMIER ACQUISITION CORP.
PREMIER DOCUMENT MANAGEMENT, INC.
PDM SERVICES, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
LOCK-UP AGREEMENT
<PAGE> 69
June 14, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Division of Corporate Finance
Re: F.Y.I. Incorporated (the "Company") - Form 8-K
Ladies and Gentlemen:
We have transmitted via EDGAR the Company's Form 8-K, pursuant to the
Securities and Exchange Act of 1934, as amended.
Very truly yours,
/s/ Margot T. Lebenberg
-----------------------
Margot T. Lebenberg
cc: Nasdaq National Market - Market Surveillance Department
Ed H. Bowman, Jr.
Robert C. Irvine
