<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
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)
<TABLE>
<S> <C> <C>
Delaware 0-27444 75-2560895
--------------- ---------------- ----------------
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
3232 McKinney Avenue
Suite 900
Dallas, Texas 75204
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(214) 953-7555
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
Reference is made to the Current Report on Form 8-K (the "Form 8-K") filed by
F.Y.I. Incorporated on June 14, 1996. The Form 8-K is hereby amended to read
in its entirety as follows:
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 (the
"B&B Agreement"), 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"). B&B's primary lines of
business include micrographic, electronic imaging and database
services.
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 is contractually restricted as to resale for
two years.
The primary source of the cash portion of the purchase price used in
the B&B Acquisition was the Company's proceeds from it's initial public
offering in January 1996.
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"). Premier provides medical records release
services in the States of California and Washington.
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 is contractually 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 proceeds from it's initial
public offering in January 1996.
<PAGE> 3
COOK ACQUISITION
On June 28, 1996, Robert A. Cook Acquisition Corp. ("Cook
Acquisition") and RAC (California) Acquisition Corp. ("RAC
Acquisition"), both wholly-owned subsidiaries of the Company, acquired
substantially all of the non-cash assets of Robert A. Cook and Staff,
Inc. ("Cook") and RAC Services, Inc. ("RAC"), respectively pursuant to
an Asset Purchase Agreement (the "Cook Agreement"), dated as of June
28, 1996 among Cook Acquisition, RAC Acquisition, the Company, Cook,
RAC, Robert A. Cook (the "Shareholder") and Anna M. Cook as
Co-Trustees of the Cook 1993 Living Trust (such acquisitions are
referred therein as the "Cook Acquisition"). Cook and RAC are
litigation support businesses in California.
The aggregate consideration paid by the Company as a result of the
Cook Acquisition was determined pursuant to arm's length negotiations
and consisted of $11,266,000 million in cash. An amount equal to
$1,000,000 in cash will be retained by the Company for a period of 90
days from the date of closing as security and as an offset for any
breach of the Cook Agreement by Cook, RAC or Shareholder.
The primary source of the cash consideration used in the Cook
transaction was provided from the Company's line of credit with Banque
Paribas.
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/A.
The Company is not aware of any material relationship that existed
prior to the B&B Acquisition, the Premier Acquisition and the Cook
Acquisition (collectively referred to as the "New Acquisitions"),
between the Company, its officers and directors, on the one hand, and
the New Acquisitions and their shareholders, on the other.
The assets of the Acquired Businesses include accounts receivables,
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, medical records releases
services and litigation support services to its customers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C>
(a) Financial Statements.
See Index to Financial Statement.
(b) Pro Forma Financial Information.
See Index to Financial Statement.
(c) Exhibits
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.(1)
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
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.(1)
10.19 Asset Purchase Agreement, dated as of June 28, 1996,
by and among F.Y.I. Incorporated, Robert A. Cook
Acquisition Corp., Robert A. Cook and Staff, Inc. and
RAC Services, Inc., Robert A. Cook and Robert A.
Cook and Anna M. Cook, as Co-Trustees of the Cook
1993 Living Trust.
10.20 First Amendment to Credit Agreement, dated as of June
26, 1996, by and among F.Y.I. Incorporated and its
subsidiaries and Banque Paribas, IB55 Sweden Bank &
Trust, and First Source Financial LLP.
10.21 Warrant issued to Ed H. Bowman, Jr.
10.22 Warrant issued to Robert C. Irvine.
21.1 List of subsidiaries of F.Y.I. Incorporated
23.1 Consent of Arthur Andersen LLP
23.4 Consent of C.W. Amos & Company, LLC
23.5 Consent of Moss Adams, LLP
(1) Previously filed as an exhibit to the Company's
Current Report on Form 8-K filed on June 14, 1996 and
incorporated herein by reference.
</TABLE>
<PAGE> 5
Index to Financial Statements
<TABLE>
<CAPTION>
PAGE
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<S> <C>
NEW ACQUISITIONS
COOK AND STAFF, INC. AND RELATED COMPANY
Report of Independent Public Accountants.......................................... F-2
Balance Sheets.................................................................... F-3
Statements of Operations.......................................................... F-4
Statements of Stockholder's Equity................................................ F-5
Statements of Cash Flows.......................................................... F-6
Notes to Financial Statements..................................................... F-7
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
Report of Independent Public Accountants.......................................... F-10
Balance Sheets.................................................................... F-11
Statements of Operations.......................................................... F-12
Statements of Stockholder's Equity................................................ F-13
Statements of Cash Flows.......................................................... F-14
Notes to Financial Statements..................................................... F-15
PREMIER DOCUMENT MANAGEMENT, INC.
Report of Independent Public Accountants.......................................... F-19
Balance Sheets.................................................................... F-20
Statements of Operations.......................................................... F-21
Statements of Stockholder's Equity................................................ F-22
Statements of Cash Flows.......................................................... F-23
Notes to Financial Statements..................................................... F-24
PRO FORMA FINANCIAL STATEMENTS
F.Y.I. INCORPORATED AND SUBSIDIARIES
Pro Forma Balance Sheet -- March 31, 1996 (unaudited)............................. F-31
Pro Forma Statement of Operations for the Year Ended December 31, 1995
(unaudited).................................................................... F-32
Pro Forma Statement of Operations for the Three Months Ended March 31, 1996
(unaudited).................................................................... F-33
Notes to Pro Forma Financial Statements (unaudited)............................... F-34
</TABLE>
F-1
<PAGE> 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cook and Staff, Inc.:
We have audited the accompanying combined balance sheets of Cook and Staff,
Inc. (a California corporation) and Related Company as of December 31, 1994 and
1995, and the related combined statements of operations, stockholder's equity,
and cash flows for the three years in the period ended December 31, 1995. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Cook and
Staff, Inc. and Related Company as of December 31, 1994 and 1995, and the
combined results of their operations and their combined cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
June 22, 1996
F-2
<PAGE> 7
COOK AND STAFF, INC. AND RELATED COMPANY
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................. $1,153,664 $1,261,271 $ 1,943,773
Accounts receivable, less allowance for doubtful
accounts of $100,000, $150,000, and $150,000
respectively........................................ 1,587,782 1,856,161 1,850,460
---------- ---------- ----------
Total current assets........................... 2,741,446 3,117,432 3,794,233
PROPERTY AND EQUIPMENT, net.............................. 449,230 346,493 309,587
OTHER NONCURRENT ASSETS.................................. 40,786 41,586 41,586
---------- ---------- ----------
Total assets................................... $3,231,462 $3,505,511 $ 4,145,406
========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities............... $ 220,140 $ 185,044 $ 199,896
Sales tax payable...................................... 48,445 42,427 57,406
Accrued compensation and benefits...................... 168,970 199,176 116,804
---------- ---------- ----------
Total current liabilities...................... 437,555 426,647 374,106
---------- ---------- ----------
DEFERRED INCOME TAXES.................................... 27,902 32,134 34,837
---------- ---------- ----------
Total liabilities.............................. 465,457 458,781 408,943
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock........................................... 13,851 13,851 13,851
Additional paid in capital............................. 405 405 405
Retained earnings...................................... 2,751,749 3,032,474 3,722,207
---------- ---------- ----------
Total stockholder's equity..................... 2,766,005 3,046,730 3,736,463
---------- ---------- ----------
Total liabilities and stockholder's equity..... $3,231,462 $3,505,511 $ 4,145,406
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-3
<PAGE> 8
COOK AND STAFF, INC. AND RELATED COMPANY
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
--------------------------------------- MARCH 31,
1993 1994 1995 -----------------------
----------- ----------- ----------- 1995 1996
---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SERVICE REVENUE................. $11,448,402 $12,014,034 $11,951,513 $2,845,343 $3,173,373
COST OF SERVICES................ 7,210,020 7,549,289 7,427,090 1,969,407 2,004,298
DEPRECIATION AND AMORTIZATION... 278,731 254,750 226,912 56,703 56,703
----------- ----------- ----------- --------- ---------
Gross profit.......... 3,959,651 4,209,995 4,297,511 819,233 1,112,372
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES....... 3,184,328 1,555,595 1,709,945 381,875 418,919
----------- ----------- ----------- --------- ---------
Operating income...... 775,323 2,654,400 2,587,566 437,358 693,453
OTHER (INCOME) EXPENSE:
Interest income............... (29,499) (44,240) (49,445) (1,788) (3,372)
Other (income) expense, net... (340,188) (13,055) 690 (309) (1,736)
----------- ----------- ----------- --------- ---------
INCOME BEFORE INCOME TAXES...... 1,145,010 2,711,695 2,636,321 439,455 698,561
PROVISION FOR INCOME TAXES...... 28,626 54,234 39,596 6,592 8,828
----------- ----------- ----------- --------- ---------
Net income............ $ 1,116,384 $ 2,657,461 $ 2,596,725 $ 432,863 $ 689,733
=========== =========== =========== ========= =========
PRO FORMA DATA
(Unaudited -- see Note 8)
HISTORICAL NET INCOME........... $ 1,116,384 $ 2,657,461 $ 2,596,725 $ 432,863 $ 689,733
PRO FORMA COMPENSATION
DIFFERENTIAL.................. 1,572,002 -- -- -- --
PRO FORMA PROVISION FOR INCOME
TAXES......................... 1,058,179 1,030,444 1,014,932 169,190 267,065
----------- ----------- ----------- --------- ---------
PRO FORMA NET INCOME............ $ 1,630,207 $ 1,627,017 $ 1,581,793 $ 263,673 $ 422,668
=========== =========== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-4
<PAGE> 9
COOK AND STAFF, INC. AND RELATED COMPANY
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992............. 100 $10,000 $405 $ 2,159,329 $ 2,169,734
Dividends declared................... -- -- -- (681,425) (681,425)
Net income........................... -- -- -- 1,116,384 1,116,384
--- ------- ---- ----------- -----------
BALANCE, December 31, 1993............. 100 10,000 405 2,594,288 2,604,693
Contribution......................... 100 3,851 -- -- 3,851
Dividends declared................... -- -- -- (2,500,000) (2,500,000)
Net income........................... -- -- -- 2,657,461 2,657,461
--- ------- ---- ----------- -----------
BALANCE, December 31, 1994............. 200 13,851 405 2,751,749 2,766,005
Dividends declared................... -- -- -- (2,316,000) (2,316,000)
Net income........................... -- -- -- 2,596,725 2,596,725
--- ------- ---- ----------- -----------
BALANCE, December 31, 1995............. 200 13,851 405 3,032,474 3,046,730
Net income (unaudited)............... -- -- -- 689,733 689,733
--- ------- ---- ----------- -----------
BALANCE, March 31, 1996 (unaudited).... 200 $13,851 $405 $ 3,722,207 $ 3,736,463
=== ======= ==== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-5
<PAGE> 10
COOK AND STAFF, INC. AND RELATED COMPANY
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------- --------------------------
1993 1994 1995 1995 1996
---------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $1,116,384 $ 2,657,461 $ 2,596,725 $ 432,863 $ 689,733
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization expense... 278,731 254,750 226,912 56,703 56,703
Deferred income taxes................... 9,399 (6,923) 4,232 6,177 2,703
Loss on disposal of assets.............. 36,337 -- 8,847 -- 822
Changes in operating assets and
liabilities --
Increase) decrease in --
Accounts receivable, net........... (366,286) 298,333 (268,379) (131,857) 5,701
Increase (decrease) in --
Accounts payable and accrued
liabilities...................... (74,072) (37,696) (35,096) (57,906) 14,852
Sales tax payable.................. 49,575 (1,084) (6,018) (38,582) 14,979
Accrued compensation and
benefits......................... 1,231 (3,183) 30,206 65,811 (82,372)
---------- ----------- ----------- ---------- ----------
Net cash provided by operating
activities..................... 1,051,299 3,161,658 2,557,429 333,209 703,121
---------- ----------- ----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment,
net..................................... (305,045) (166,222) (137,422) (75,781) (20,619)
Proceeds from sales of property........... 24,781 -- 4,400 -- --
Other..................................... (3,878) (610) (800) -- --
---------- ----------- ----------- ---------- ----------
Net cash used in investing
activities....................... (284,142) (166,832) (133,822) (75,781) (20,619)
---------- ----------- ----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends............................ (681,425) (2,500,000) (2,316,000) -- --
---------- ----------- ----------- ---------- ----------
Net cash used in financing
activities....................... (681,425) (2,500,000) (2,316,000) -- --
---------- ----------- ----------- ---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS... 85,732 494,826 107,607 257,428 682,502
CASH AND CASH EQUIVALENTS, at beginning of
period.................................... 573,106 658,838 1,153,664 1,153,664 1,261,271
---------- ----------- ----------- ---------- ----------
CASH AND CASH EQUIVALENTS, at end of
period.................................... $ 658,838 $ 1,153,664 $ 1,261,271 $ 1,411,092 $ 1,943,773
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for --
Income taxes............................ $ 800 $ 52,500 $ 39,750 $ 18,000 $ 9,756
NONCASH FINANCING TRANSACTIONS:
Contribution, equipment................... $ -- $ 3,851 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-6
<PAGE> 11
COOK AND STAFF, INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
The accompanying combined financial statements include the accounts of Cook
and Staff, Inc. and RAC Services, Inc. (the "Related Company", collectively the
"Company"). The Company provides litigation support services to its customers
from its offices in California.
In June 1996, the Company and its stockholder intend to enter into a
definitive agreement with F.Y.I. Incorporated ("FYI") pursuant to which the
Company will sell selected assets to FYI (the "Acquisition").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
Cook and Staff, Inc. and Related Company are under common control. All
significant intercompany transactions have been eliminated in combination.
Fiscal Year-Ends
RAC Services, Inc. has a December 31 year-end. Cook and Staff, Inc. has a
June 30 year-end. Cook and Staff, Inc. accounts and results for the three years
have been recast to a December 31 year-end. The accounts and results of RAC
Services, Inc., using a December 31 year-end, have been combined with the recast
December 31 year-end accounts and results of Cook and Staff, Inc. in the
accompanying combined financial statements for 1993, 1994, and 1995.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash equivalents are
carried at cost, which approximates market value.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using
accelerated methods over the estimated useful lives of the assets.
Other Long-Lived Assets
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" (SFAS 121), which established
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Company does
not expect the adoption of SFAS 121 would have any material effect on the
combined financial statements.
Revenue Recognition
Revenue is recognized when services are rendered to the Company's
customers.
Income Taxes
The Company is an S corporation for income tax purposes and, accordingly,
any income tax liabilities are the responsibility of the stockholder.
F-7
<PAGE> 12
COOK AND STAFF, INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration
of credit risk, as defined by SFAS No. 105, consist primarily of trade accounts
receivable. The Company's customers are concentrated in the Western United
States and the primary customers are insurance companies and legal institutions.
The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and other
information.
3. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS) 1994 1995
------------ ----------- -----------
<S> <C> <C> <C>
Machinery and equipment...................... 5-7 $ 1,038,070 $ 1,109,464
Computer equipment........................... 5 706,630 756,677
Autos........................................ 5 50,203 50,203
----------- -----------
1,794,903 1,916,344
Less -- Accumulated depreciation............. (1,345,673) (1,569,851)
----------- -----------
$ 449,230 $ 346,493
=========== ===========
</TABLE>
4. INCOME TAXES:
The Company has elected S corporation status under the Internal Revenue
Code. In lieu of federal income taxes, the shareholder is taxed on the Company's
taxable income. Therefore, no provision or liability for federal income tax has
been included in the financial statements for the years ended December 31, 1993,
1994, and 1995. A deferred state tax liability exists primarily due to the cash
basis method of reporting for income tax purposes. The deferred tax liability
represents the State of California S corporation tax on the net temporary
differences.
State income taxes are as follows at December 31:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Current............................................... $19,227 $61,157 $35,364
Deferred.............................................. 9,399 (6,923) 4,232
------- ------- -------
$28,626 $54,234 $39,596
======= ======= =======
</TABLE>
F-8
<PAGE> 13
COOK AND STAFF, INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases office facilities in California. The leases provide for
lease terms over five years commencing on November 1, 1989, through June 30,
1999, with monthly lease payments of $2,534 to $20,866. The lease agreements
provide that the Company pay all related taxes and insurance. The total lease
expense for the years ended 1993, 1994, and 1995, totaled approximately
$399,000, $411,000 and $416,000, respectively. Minimum future lease payments
under operating leases as of December 31, 1995, for each of the next five years
and in the aggregate are as follows:
<TABLE>
<S> <C>
1996.............................................. $385,863
1997.............................................. 136,455
1998.............................................. 86,135
1999.............................................. 15,966
Thereafter........................................ --
--------
Total................................... $624,419
========
</TABLE>
Litigation
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for workers'
compensation incurred in connection with its operations. Management believes
that none of these actions will have a material adverse effect on the financial
position or results of operations of the Company.
6. COMMON STOCK:
Common stock at December 31, 1994 and 1995 consists of the following:
<TABLE>
<CAPTION>
PAR ASSIGNED
VALUE AUTHORIZED ISSUED VALUE
----- ---------- ------ --------
<S> <C> <C> <C> <C>
Cook and Staff, Inc....................................... $ 100 1,000 100 $ 10,000
RAC Services, Inc......................................... None 1,000,000 100 3,851
--------- --- -------
1,001,000 200 $ 13,851
========= === =======
</TABLE>
7. SIGNIFICANT CUSTOMER:
The Company has two litigation support customer relationships which
combined billings to the respective customer branches and their independent
vendor attorneys were approximately 25% and 12% for the year ended December 31,
1995, 23% and 12% for the year ended December 31, 1994, and 11% and 12% for the
year ended December 31, 1993.
8. PRO FORMA NET INCOME (UNAUDITED):
Selling, general, and administrative expenses for the periods presented
reflect compensation and related benefits that owners and certain key employees
received during the periods. These owners and key employees have agreed to
certain reductions in salaries and benefits in connection with the Acquisition.
The unaudited pro forma data present compensation at the level the officers
and owners of the Company have agreed to receive subsequent to the Acquisition.
In addition, the pro forma data present the incremental provision for income
taxes as if the Company had been subject to federal and state income taxes and
adjusted for the impact of the compensation differential discussed above.
F-9
<PAGE> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
B & B Information and Image Management, Inc.
Upper Marlboro, Maryland
We have audited the accompanying balance sheets of B & B Information and
Image Management, Inc. (an S Corporation) as of December 31, 1995 and 1994, and
the related statements of income, stockholder's equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of B & B Information and Image
Management, Inc. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
C.W. AMOS & COMPANY, LLC
Baltimore, Maryland
March 20, 1996 (except for Note 8
for which the date is May 31, 1996)
F-10
<PAGE> 15
B & B INFORMATION AND IMAGE MANAGEMENT, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash................................................. $ 246,350 $ 173,189 $ 242,353
Trade and other receivables, less allowance for
doubtful accounts in 1994 of $11,200 and 1995 of
$20,200........................................... 1,280,436 1,851,326 1,756,097
Inventories.......................................... 172,700 154,715 242,023
Prepaid expenses..................................... 56,812 80,627 46,779
---------- ---------- ----------
Total current assets......................... $1,756,298 $2,259,857 $2,287,252
---------- ---------- ----------
PROPERTY AND EQUIPMENT, net............................ $3,083,803 $3,125,103 $3,156,065
---------- ---------- ----------
OTHER ASSETS
Prepaid expenses and deposits........................ $ 30,260 $ 1,418 $ 2,243
Debt issuance costs, net of accumulated amortization
in 1994 of $90,303 and 1995 of $131,389........... 87,893 103,235 101,848
---------- ---------- ----------
$ 118,153 $ 104,653 $ 104,091
$4,958,254 $5,489,613 $5,547,408
========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Note payable, bank................................... $ -- $ 50,000 $ 150,000
Current maturities of long-term debt................. 231,827 157,612 159,366
Accounts payable and accrued expenses................ 637,941 984,884 771,692
Dividends payable.................................... -- -- 252,928
Deferred revenue..................................... 241,522 290,599 255,130
---------- ---------- ----------
Total current liabilities.................... $1,111,290 $1,483,095 $1,589,116
---------- ---------- ----------
LONG-TERM DEBT......................................... $2,729,236 2,491,070 $2,450,022
---------- ---------- ----------
CONTINGENCY
STOCKHOLDER'S EQUITY
Capital stock, par value $10 per share; 100 shares
authorized, issued and outstanding................ $ 1,000 $ 1,000 $ 1,000
Additional paid-in capital........................... 81,590 81,590 81,590
Retained earnings.................................... 1,035,138 1,432,858 1,425,680
---------- ---------- ----------
$1,117,728 $1,515,448 $1,508,270
---------- ---------- ----------
$4,958,254 $5,489,613 $5,547,408
========== ========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-11
<PAGE> 16
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------ ------------------------
1994 1995 1995 1996
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Service revenue............................ $5,343,032 $6,495,449 $1,570,720 $1,944,715
Product revenue............................ 777,896 1,549,756 211,982 271,064
Other revenue.............................. 59,910 34,749 14,401 10,945
---------- ---------- ---------- ----------
$6,180,838 $8,079,954 $1,797,103 $2,226,724
COST OF SERVICES............................. 3,108,429 3,658,599 827,515 1,115,918
COST OF PRODUCT SOLD......................... 610,836 1,250,228 162,714 235,779
DEPRECIATION................................. 301,455 332,937 75,519 84,510
---------- ---------- ---------- ----------
Gross profit....................... $2,160,118 $2,838,190 $ 731,355 $ 790,517
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES................................... 1,621,830 1,920,570 439,081 500,153
---------- ---------- ---------- ----------
Operating income................... $ 538,288 $ 917,620 $ 292,274 $ 290,364
OTHER (INCOME) EXPENSE:
Interest income............................ (83) (706) (184) (825)
Interest expense........................... 138,836 183,708 52,383 41,552
Amortization............................... 65,355 41,086 -- 1,387
Other, net................................. (3,918) 6,043 -- (15,000)
---------- ---------- ---------- ----------
Net income......................... $ 338,098 $ 687,489 $ 240,075 $ 263,250
========== ========== ========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-12
<PAGE> 17
B&B INFORMATION AND IMAGE MANAGEMENT, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993................ 100 $1,000 $ 81,590 $ 927,406 $1,009,996
Net income.............................. -- -- -- 338,098 338,098
Shareholder dividends................... -- -- -- (230,366) (230,366)
--- ------ ------- ---------- ----------
BALANCE, December 31, 1994................ 100 $1,000 $ 81,590 $1,035,138 $1,117,728
Net income.............................. -- -- -- 687,489 687,489
Shareholder dividends................... -- -- -- (289,769) (289,769)
--- ------ ------- ---------- ----------
BALANCE, December 31, 1995................ 100 $1,000 $ 81,590 $1,432,858 $1,515,448
Net income (unaudited).................. -- -- -- 263,250 263,250
Shareholder dividends (unaudited)....... -- -- -- (270,428) (270,428)
--- ------ ------- ---------- ----------
BALANCE, March 31, 1996 (unaudited)....... 100 $1,000 $ 81,590 $1,425,680 $1,508,270
=== ====== ======= ========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-13
<PAGE> 18
B & B INFORMATION AND IMAGE MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- -----------------------
1994 1995 1995 1996
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $ 338,098 $ 687,489 $ 240,075 $ 263,250
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................ 301,455 332,937 75,519 84,510
Amortization............................ 65,355 41,086 -- 1,387
Increase (decrease) in provision for
doubtful accounts..................... (58,500) 9,000 -- 3,000
(Gain) loss on sale of property and
equipment............................. -- 6,833 -- (15,000)
Changes in assets and liabilities:
(Increase) decrease in:
Trade and other receivables........ (351,096) (579,890) (80,170) 92,229
Inventories........................ 14,649 17,985 (57,052) (87,308)
Prepaid expenses and deposits...... (18,283) 5,027 (3,330) 33,023
Increase (decrease) in:
Accounts payable and accrued
expenses......................... 20,078 256,605 (24,246) (213,192)
Deferred revenue................... 71,781 49,077 (29,350) (35,469)
--------- --------- --------- ---------
Net cash provided by operating
activities.................... $ 383,537 $ 826,149 $ 121,446 $ 126,430
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........ $(245,082) $(359,432) $ (40,667) $(118,166)
Proceeds from sale of property and
equipment............................... -- 68,700 -- 17,694
--------- --------- --------- ---------
Net cash used by investing
activities.................... $(245,082) $(290,732) $ (40,667) $(100,472)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayment) of short-term
borrowings.............................. $(439,000) $ 50,000 $ -- $ 100,000
Proceeds from long-term borrowings......... 565,352 223,787 13,489 --
Payments on long-term debt................. (139,120) (536,168) (45,257) (39,294)
Debt issuance costs........................ -- (56,428) -- --
Shareholder dividends...................... (230,366) (289,769) (120,037) (17,500)
--------- --------- --------- ---------
Net cash used by financing
activities.................... $(243,134) $(608,578) $(151,805) $ 43,206
--------- --------- --------- ---------
Net increase (decrease) in cash.............. $(104,679) $ (73,161) $ (71,026) $ 69,164
Cash, beginning of year...................... 351,029 246,350 246,350 173,189
--------- --------- --------- ---------
Cash, end of year............................ $ 246,350 $ 173,189 $ 175,324 $ 242,353
========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.............................. $ 134,633 $ 180,544 $ 52,383 $ 41,552
========= ========= ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Purchases of property and equipment
included in accounts payable............ $ -- $ 90,338 $ -- $ --
========= ========= ========= =========
Dividends declared and payable............. $ -- $ -- $ -- $ 252,928
========= ========= ========= =========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-14
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
NOTE 1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
B & B Information and Image Management, Inc. ("Company") is in the
principal business of converting paper documents into electronic and microfilm
images for customers in the Mid-Atlantic region.
Significant accounting policies not disclosed elsewhere in the financial
statements are as follows:
Depreciation:
Depreciation is provided on the straight-line method over the
estimated useful lives of the related assets.
Amortization:
Debt issuance costs are being amortized on the straight-line method
over the terms of the related debt.
Income taxes:
The Company has elected to be treated as a Small Business Corporation
(an S Corporation) under the provisions of the Internal Revenue Code. The
financial statements do not include a provision for income taxes since
taxable income is allocated to and reported directly by the shareholder.
Revenue recognition:
Microfilm processing revenue is recognized on a
percentage-of-completion basis. Service contract revenue is recognized on a
straight-line basis over the terms of the individual service contracts.
Revenue from the sale of supplies and equipment is recognized upon
shipment.
Credit risk:
The Company has deposits in a financial institution in excess of
amounts insured by the Federal Deposit Insurance Corporation.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period.
NOTE 2. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market, and include the following:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Parts and supplies............................................. $167,083 $154,530
Equipment for resale........................................... 5,617 185
-------- --------
$172,700 $154,715
======== ========
</TABLE>
F-15
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and consists of the following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ------------------------
(YEARS) 1994 1995
------------ ---------- ----------
<S> <C> <C> <C>
Land and land improvements....................... -- $ 599,773 $ 599,773
Building......................................... 40 1,961,701 1,972,704
Production equipment............................. 5 to 7 1,590,491 1,892,259
Furniture and fixtures........................... 5 to 7 192,413 203,186
Transportation equipment......................... 3 279,264 282,342
---------- ----------
$4,623,642 $4,950,264
Less accumulated depreciation.................... 1,539,839 1,825,161
---------- ----------
$3,083,803 $3,125,103
========== ==========
</TABLE>
NOTE 4. NOTE PAYABLE AND LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
INTEREST
DESCRIPTION RATE 1994 1995
---------------------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Industrial Revenue Bonds; Variable Rate Variable
Demand/Fixed Rate Revenue Bonds, Prince (3.95% at
George's County, Maryland; due beginning in December 31,
1996 through 2014........................... 1995) $2,400,000 $2,400,000
Consolidated term loan, bank; due December,
1997; paid in full in 1995.................. Prime + 1.0% 460,443 --
Term loan, bank; due April, 1998.............. Prime + 1.0% -- 161,111
Notes payable, vehicles; due at various dates Varies 8.99%
through November, 1998...................... to 13.2% 54,890 58,068
Note payable, equipment; due July, 1997....... 6.00% 16,502 10,237
Note payable, equipment; due August, 1997..... 4.77% 29,228 19,266
---------- ----------
$2,961,063 $2,648,682
Current maturities............................ 231,827 157,612
---------- ----------
Long-term debt................................ $2,729,236 $2,491,070
========== ==========
</TABLE>
During 1995, the Company obtained a $250,000 demand revolving line of
credit for short-term working capital financing which is limited to 80% of
eligible accounts receivable at the bank's prime rate plus 1%, expiring in
April, 1996. The note is collateralized by all assets of the Company excluding
real estate and is guaranteed by the Company's shareholder. Borrowings on the
line of credit at December 31, 1995 were $50,000.
The Industrial Revenue Bonds were issued to provide funds for the
construction of the Company's office and operating facility, for the purchase of
certain equipment to be used in that facility, and for certain related expenses.
All real estate, equipment, and other tangible property at the location are
pledged as collateral to the bond holders.
The Industrial Revenue Bonds are secured by a letter of credit issued by a
bank on behalf of the Company for approximately $2,450,000, expiring on December
31, 1996. The letter of credit is guaranteed by
F-16
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the Company's shareholder. The letter of credit was placed with a new bank
during 1995 resulting in issuance costs of $56,428. The Company has the option
to extend the letter of credit based on the bank's annual review.
The Company had a consolidated term loan with its former bank, payable in
monthly installments of $12,500 plus interest at the bank's prime rate plus 1%,
maturing on December 31, 1997. During 1995, the Company borrowed $200,000 from a
bank, and used the proceeds and operating cash to repay the consolidated term
loan. The new term loan is payable in 36 equal monthly installments of
principal, plus interest through April, 1998, and is collateralized by all
assets of the Company, excluding real estate, and is guaranteed by the Company's
shareholder.
The bond indenture, term loan and letter of credit agreements have
covenants which, among other things, require the maintenance of certain
financial ratios. In addition, cross-default provisions exist among the bond
indenture and related agreements.
Notes payable, vehicles and equipment have senior collateral rights to
certain property and equipment, excluding the facility and related land pledged
to the bondholders, and are subordinated to the term loan as to accounts
receivable and inventories.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1996............................................. $ 157,612
1997............................................. 153,098
1998............................................. 87,972
1999............................................. 100,000
2000............................................. 100,000
Thereafter....................................... 2,050,000
----------
$2,648,682
==========
</TABLE>
The fair value of the note payable and long-term debt at December 31, 1995
approximates $2,301,000 based upon loans with similar terms and average
maturities currently being offered to the Company.
NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Accounts payable............................................... $355,908 $530,471
Accrued payroll and related benefits........................... 256,178 409,623
Other accrued expenses......................................... 25,855 44,790
-------- --------
$637,941 $984,884
======== ========
</TABLE>
NOTE 6. RELATED PARTY TRANSACTIONS
The Company traded with a related party in the amount of $120,000 for the
years ended December 31,
1995 and 1994. At December 31, 1994, $20,000 was included in accounts payable
and accrued expenses.
NOTE 7. CONTINGENCY
A former employee has filed a grievance against the Company with the Equal
Employment Opportunity Commission for discrimination and wrongful termination.
Management and the Company's counsel believe that the allegations and grievance
are without merit, and intend to vigorously contest this claim.
F-17
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. SUBSEQUENT EVENT (UNAUDITED)
On May 31, 1996, the Company and its shareholder entered into an agreement
to be merged into F.Y.I. Incorporated effective May 1, 1996. The Company will
continue to operate as a wholly-owned subsidiary of F.Y.I.
F-18
<PAGE> 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Premier Document Management, Inc.
We have audited the accompanying combined balance sheet of Premier Document
Management, Inc. and Affiliate as of December 31, 1995 and the related combined
statements of income, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Premier Document
Management, Inc. and Affiliate as of December 31, 1995 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
MOSS ADAMS LLP
Seattle, Washington
June 21, 1996
F-19
<PAGE> 24
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents......................................... $ 87,550 $ 267,258
Accounts receivable -- trade, net of allowance for doubtful
accounts of $13,494 in 1995 and $13,778 in 1996................ 196,655 229,729
Refundable income taxes........................................... 23,000 10,100
Prepaid expenses.................................................. 86,846 65,962
------- -------
Total current assets...................................... 394,051 573,049
PROPERTY AND EQUIPMENT, net......................................... 311,090 341,335
DEPOSITS............................................................ 10,888 10,888
------- -------
$716,029 $ 925,272
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................................. $ 12 $ 49,697
Notes payable..................................................... 34,944 34,944
Accrued liabilities
Wages.......................................................... 11,170 105,037
Vacation....................................................... 20,000 32,600
Payroll taxes.................................................. 346 21,803
Business taxes................................................. 14,669 4,435
Deferred income taxes............................................. 82,900 81,900
------- -------
Total current liabilities................................. 164,041 330,416
------- -------
COMMITMENTS AND CONTINGENCY (Notes 7 and 10)
STOCKHOLDERS' EQUITY
Common stock...................................................... 21,000 21,000
Additional paid-in capital........................................ 72,229 72,229
Retained earnings................................................. 458,759 501,627
------- -------
551,988 594,856
------- -------
$716,029 $ 925,272
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-20
<PAGE> 25
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED ---------------------------
DECEMBER 31, 1996 1995
1995 ----------- -----------
------------ (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
SERVICE REVENUE........................................ $3,022,691 $ 866,752 $ 696,022
COST OF SERVICES....................................... 1,632,568 498,389 371,472
DEPRECIATION........................................... 84,367 27,733 16,235
---------- -------- --------
Gross profit................................. 1,305,756 340,630 308,315
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........... 1,185,033 286,571 256,466
---------- -------- --------
Operating income............................. 120,723 54,059 51,849
OTHER INCOME (EXPENSE)
Interest income...................................... 8,379 709 3,242
Interest expense..................................... (209) -- --
---------- -------- --------
Income before income taxes................... 128,893 54,768 55,091
PROVISION FOR INCOME TAXES............................. 32,243 11,900 12,100
---------- -------- --------
NET INCOME............................................. $ 96,650 $ 42,868 $ 42,991
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-21
<PAGE> 26
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994, as previously
reported (Unaudited)..................... 120,000 $21,000 $ 72,229 $374,109 $467,338
Prior period adjustment (Note 11)........ (12,000) (12,000)
------- ------- ------- -------- --------
BALANCE, December 31, 1994, as restated.... 120,000 21,000 72,229 362,109 455,338
Net income....................... 96,650 96,650
------- ------- ------- -------- --------
BALANCE, December 31, 1995................. 120,000 21,000 72,229 458,759 551,988
Net income....................... 42,868 42,868
------- ------- ------- -------- --------
BALANCE, March 31, 1996 (Unaudited)........ 120,000 $21,000 $ 72,229 $501,627 $594,856
======= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-22
<PAGE> 27
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED -------------------------
DECEMBER 31, 1996 1995
1995 ----------- -----------
------------ (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 96,650 $ 42,868 $ 42,991
Adjustments to reconcile income from operations to net
cash from operating activities
Depreciation and amortization......................... 118,555 37,154 24,324
Deferred income taxes................................. 15,000 (1,000) (5,600)
Changes in assets and liabilities
Accounts receivable -- trade, net................... (37,851) (33,074) (28,704)
Refundable income taxes............................. (40,000) 12,900 (4,400)
Prepaid expenses.................................... (16,825) 20,884 35,303
Deposits............................................ 1,406 -- --
Accounts payable.................................... (3,275) 49,685 42,028
Accrued liabilities................................. 16,338 117,690 46,183
--------- -------- --------
149,998 247,107 152,125
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment...................... (240,063) (67,399) (59,166)
Receipts (advances) on note receivable................... 45,500 -- (3,156)
--------- -------- --------
(194,563) (67,399) (62,322)
--------- -------- --------
CHANGE IN CASH............................................. (44,565) 179,708 89,803
CASH AND CASH EQUIVALENTS
Beginning of period...................................... 132,115 87,550 132,116
--------- -------- --------
End of period............................................ $ 87,550 $ 267,258 $ 221,919
--------- -------- --------
SUPPLEMENTAL INFORMATION
Cash paid during the period for
Interest.............................................. $ 209 $ -- $ --
--------- -------- --------
Income tax............................................ $ 57,243 $ -- $ 22,100
--------- -------- --------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-23
<PAGE> 28
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 -- OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS -- Premier Document Management, Inc. and Affiliate (the
"Company") provides medical records reproduction and management services on
behalf of hospitals and medical clinics in the Pacific Northwest. The amount the
Company can charge requesting parties for reproduction services is regulated by
law. It operates out of facilities located throughout Washington and in San
Jose, California.
On May 31, 1996, the Company merged with Premier Acquisition Corp., a
wholly-owned subsidiary of F.Y.I. Incorporated (see Note 12).
PRINCIPLES OF COMBINATION -- The combined financial statements include the
accounts of Premier Document Management, Inc. and PDM Services, Inc., an
affiliate controlled through common ownership. All material intercompany
transactions have been eliminated.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH EQUIVALENTS -- For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
DEPRECIATION AND AMORTIZATION -- Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized using the straight-line method over the
estimated useful lives of the related assets or the length of the lease,
whichever is less.
INCOME TAXES -- Income taxes are provided for the effect of transactions
reported in the financial statements tax provision consists of taxes currently
due plus deferred taxes related to differences in the financial statement and
tax bases of certain assets and liabilities.
PDM Services, Inc., with consent of its stockholder, has elected to be
taxed as an S corporation. In lieu of corporate income taxes, the stockholders
of an S corporation are taxed on their proportionate share of taxable income. On
May 31, 1996, the Company merged with Premier Acquisition Corp. and ceased to be
an S corporation (see Note 12).
INTERIM FINANCIAL STATEMENTS -- The accompanying combined statements of
income and cash flows for the three months ended March 31, 1996 and 1995 are
unaudited. The unaudited results of operations and cash flows have been prepared
on the same basis as the audited combined financial statements and, in the
opinion of management, include all adjustments necessary for a fair presentation
for the periods presented.
F-24
<PAGE> 29
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Copying equipment........................................... $189,907 $ 209,845
Vehicles.................................................... 144,054 158,467
Computer hardware........................................... 222,120 249,792
Computer software........................................... 20,352 20,352
Office furniture............................................ 56,857 62,233
Production equipment........................................ 29,574 29,574
Leasehold improvements...................................... 7,233 7,233
-------- --------
670,097 737,496
Less accumulated depreciation and amortization.............. 359,007 396,161
-------- --------
$311,090 $ 341,335
======== ========
</TABLE>
NOTE 3 -- RELATED PARTY TRANSACTIONS
NOTE RECEIVABLE -- At December 31, 1994, the Company held a $45,500
promissory note receivable from its President and majority stockholder. During
1995, payment was received in full, along with $3,326 of interest.
NOTES PAYABLE -- The Company has four unsecured promissory notes totaling
$34,944 payable to its President and majority stockholder. The notes are payable
on demand and bear interest at 4%. Subsequent to March 31, 1996, the stockholder
contributed the notes to the Company. Accordingly, the balance was reclassified
to additional paid-in capital.
NOTE 4 -- INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED --------------------------
DECEMBER 31, 1996 1995
1995 ----------- -----------
------------ (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Current expense.................................. $ 17,243 $12,900 $12,600
Deferred expense (benefit)....................... 15,000 (1,000) (500)
------- ------- -------
$ 32,243 $11,900 $12,100
======= ======= =======
</TABLE>
F-25
<PAGE> 30
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes differs from the amount determined by
applying U.S. statutory federal income tax rates to income before income taxes
as a result of the following differences:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------
1995 1996 1995
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Tax at statutory rates........................... $ 30,332 $ 8,692 $ 9,186
Non-deductible loss of PDM Services, Inc., an S
corporation................................. 940 379 (17)
Non-deductible items........................... 1,262 143 61
Effect of estimated higher rates used to
calculate deferred tax assets and
liabilities................................. (291) 2,686 2,870
------- ------- -------
Provision for income taxes....................... $ 32,243 $11,900 $12,100
======= ======= =======
</TABLE>
Deferred income taxes are computed based on temporary differences between
the financial statement and tax bases of certain assets and liabilities. The
Company has elected to prepare its income tax return using the cash method of
accounting. Accordingly, temporary differences relate to accrual basis assets
and liabilities as well as differences in accumulated depreciation. Gross
deferred income tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax liabilities
Accrual basis income...................................... $ 92,100 $ 92,100
Depreciation.............................................. 8,600 7,600
-------- --------
100,700 99,700
Deferred tax assets
Accrual basis expenses.................................... (17,800) (17,800)
-------- --------
Net deferred tax liability.................................. $ 82,900 $ 81,900
======== ========
</TABLE>
Income taxes for the three months ended March 31, 1995 and 1996 were
computed using the effective tax rate estimated to be applicable for the full
fiscal year.
NOTE 5 -- COMMON STOCK
Common stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Premier Document Management, Inc.
$1 par value; 50,000 shares authorized; 20,000 shares
issued and outstanding.................................... $ 20,000 $20,000
PDM Services, Inc.
No par value, 1,000,000 shares authorized; 100,000 shares
issued and outstanding.................................... 1,000 1,000
------- -------
$ 21,000 $21,000
======= =======
</TABLE>
F-26
<PAGE> 31
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- RETIREMENT PLAN
The Company sponsors a defined contribution employee retirement plan
qualified under IRC Section 401(k). The plan covers substantially all employees
18 years of age or older with one year of service. The Company makes annual
matching contributions to the plan ranging up to 1.5% of eligible participants'
compensation. Total pension expense for the year ended December 31, 1995 and the
three months ended March 31, 1996 (unaudited) and 1995 (unaudited) was $6,068,
$1,524 and $1,479, respectively. The Company may also make contributions that
are discretionary, as determined by the Board of Directors. No discretionary
contributions were made during 1995 or the first three months of 1996.
NOTE 7 -- COMMITMENTS
The Company is obligated under operating lease agreements for three office
facilities. Future minimum lease payments under these leases for years ending
December 31 are as follows:
<TABLE>
<CAPTION>
SEATTLE SPOKANE TACOMA TOTAL
------- ------- ------ -------
<S> <C> <C> <C> <C>
1996.......................................... $70,400 $ 5,400 $4,300 $80,100
1997.......................................... -- 5,400 2,100 7,500
1998.......................................... -- 4,500 -- 4,500
------- ------- ------ -------
$70,400 $15,300 $6,400 $92,100
======= ======= ====== =======
</TABLE>
Future minimum lease payments at March 31, 1996 were not materially
different from the amounts at December 31, 1995. The Company also leases office
space in San Jose, California for $500 per month. The lease may be terminated by
either party with 60 days notice.
Rent expense for the year ended December 31, 1995 and three months ended
March 31, 1996 (unaudited) and 1995 (unaudited) was approximately $75,500,
$18,200 and $20,100, respectively.
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Notes payable to stockholder are carried at $34,944, bear interest at 4%,
and are payable on demand. Because of the related party nature of these
financial instruments, which allows for possible modification to their terms and
maturities, it is not practicable to estimate fair value.
NOTE 9 -- CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMER
CONCENTRATIONS OF CREDIT RISK -- Financial instruments that potentially
subject the Company to credit risk consist of cash and cash equivalents and
trade receivables. The Company places its temporary cash investments with major
financial institutions. At times, deposits may exceed federally insured limits.
The Company generally does not require collateral on trade receivables, however,
prepayment is required from customers whose outstanding balance exceeds 90 days.
Historically, credit related losses have not been significant.
MAJOR CUSTOMER -- The Company receives more than ten percent of its revenue
from the State of Washington Department of Social and Human Services. Following
is a summary of the percentage of revenue earned and accounts receivable due
from this customer:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEAR ENDED ---------------------------
DECEMBER 31, 1996 1995
1995 ----------- -----------
------------ (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues......................................... 15.8% 12.6% 15.2%
==== ==== ====
Accounts receivable.............................. 14.3% 14.9%
---- ----
</TABLE>
F-27
<PAGE> 32
PREMIER DOCUMENT MANAGEMENT, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- CONTINGENCY
The Company is a co-defendant in a lawsuit alleging improper disclosure of
an individual's medical records. The amount of damages has not been specified.
Defense of the claim has been assumed by the Company's insurance carrier.
Management believes the suit is without merit and will not have a material
effect on the Company's financial position.
NOTE 11 -- PRIOR PERIOD ADJUSTMENT
Management has determined that accrued vacation expense was not recorded in
prior years. Accrual of this liability, net of tax, resulted in a $12,000
decrease in retained earnings at December 31, 1994.
NOTE 12 -- SUBSEQUENT EVENTS
COMPANY MERGER -- On May 31, 1996, the Company merged with Premier
Acquisition Corp. ("Premier"), a wholly-owned subsidiary of F.Y.I. Incorporated
("FYI"). Under the terms of the Agreement and Plan of Reorganization, Company
stockholders received consideration consisting of cash and shares of FYI common
stock. Additional consideration is contingent on the performance of Premier
during the eight month period ended December 31, 1996.
In connection with the merger, the Company President and majority
stockholder executed a five year noncompetition agreement with Premier and FYI.
All other stockholders executed similar agreements with terms of three years.
The majority stockholder also entered into a three year employment agreement as
President of Premier.
EXECUTIVE BONUS -- On May 30, 1996, the Company paid a $225,000 bonus to
its President.
F-28
<PAGE> 33
F.Y.I. INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
These pro forma combined financial statements should be read in conjunction
with the historical financial statements of the Founding Companies Combined,
F.Y.I. Incorporated financial statements and the individual Founding Company
financial statements. See "Index to Financial Statements."
F.Y.I. acquired, simultaneously with and as a condition to the closing of
the Offering in January 1996, Imagent, Researchers, Recordex, DPAS, Leonard,
Deliverex and Permanent Records. The Acquisitions have been accounted for in
accordance with generally accepted accounting principles ("GAAP") as a
combination of the Founding Companies at historical cost, because the Founding
Companies' stockholders transfered assets to F.Y.I. in exchange for Common Stock
and cash simultaneously with F.Y.I.'s initial public offering, the nature of
future operations of the Company will be substantially identical to the combined
operations of the Founding Companies, and no former stockholder group of any of
the Founding Companies obtained a majority of the outstanding voting shares of
the Company. Accordingly, historical financial statements of these Founding
Companies have been combined throughout all relevant periods as if the Founding
Companies had always been members of the same operating group. However, since
the Founding Companies were not under common control or management, historical
combined results may not be comparable to, or indicative of, future performance.
For accounting purposes the acquisitions of the Founding Companies were recorded
by the Company as of January 31, 1996.
In May 1996, the Company acquired B&B Information and Image Management,
Inc. ("B&B") and Premier Document Management, Inc. and PDM Services, Inc.
("Premier"). In June 1996, the Company acquired all of the non-cash assets of
Robert A. Cook and Staff, Inc. and RAC Services, Inc. ("Cook"). All of the New
Acquisitions are accounted for under the purchase method of accounting.
The following unaudited pro forma financial statements of F.Y.I.
Incorporated and subsidiaries gives effect to: (i) the Acquisitions of B&B,
Premier and Cook and (ii) the acquisition of the Founding Companies for the
periods prior to the consummation of the acquisitions (January 31, 1996).
The unaudited pro forma balance sheet is based upon:
(i) the unaudited consolidated balance sheet of F.Y.I. as of March 31,
1996; and
(ii) the unaudited balance sheet of B&B and Premier purchased during
May 1996 and Cook purchased during June 1996 as if the acquisitions had
occurred on March 31, 1996.
The unaudited pro forma statement of operations for the three months ended
March 31, 1996 is based upon:
(i) the unaudited statement of operations of F.Y.I. for the period
from February 1, 1996 to March 31, 1996 combined with the unaudited
statement of operations for the Founding Companies for the one month ended
January 31, 1996;
(ii) the unaudited statement of operations for B&B, Premier and Cook
from January 1, 1996 to March 31, 1996.
The unaudited pro forma statement of operations for the year ended December
31, 1995 is based upon:
(i) the audited combined financial statements of the Founding
Companies for the year ended December 31, 1995; and
(ii) the audited financial statements of B&B, Premier and Cook for the
year ended December 31, 1995.
The pro forma financial statements have been prepared based upon certain
assumptions and include all adjustments as detailed in the Notes to Pro Forma
Financial Statements.
F-29
<PAGE> 34
The Company has preliminarily analyzed the savings that it expects to be
realized by consolidating certain general and administrative functions,
including reductions in accounting, audit, insurance and benefit plan expenses.
In addition, the Company anticipates that it will realize significant benefits
from: (i) the reduction in interest payments related to the prepayment of
outstanding Founding Company debt; (ii) its ability to borrow at lower interest
rates than the Founding Companies; and (iii) the interest earned on the net
proceeds of the Offering remaining after payment of the expenses of the Offering
and the cash portion of the consideration for the Founding Companies. The
Company has not and cannot quantify these savings at the present time. These
savings will be offset by the costs of being a public company and the
incremental increase in costs related to the Company's new management. However,
these costs, like the savings that they offset, cannot be quantified accurately.
Accordingly, neither the anticipated savings nor the anticipated costs have been
included in the pro forma financial information of F.Y.I. Incorporated and
Subsidiaries for the periods prior to the acquisition of the Founding Companies.
The pro forma financial data does not purport to represent what the
Company's financial position or results of operations would actually have been
if such transaction in fact had occurred on those dates or to project the
Company's financial position or results of operations for any future period.
F-30
<PAGE> 35
F.Y.I. INCORPORATED AND SUBSIDIARIES
PRO FORMA BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
F.Y.I. NEW PRO FORMA
INCORPORATED ACQUISITIONS COMBINED
------------ ------------ ---------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................ $ 10,037 $ (7,098)(A) $ 2,939
Accounts receivable, less allowance.................. 8,369 3,577 (A) 11,946
Prepaids and other current assets.................... 925 598 (A) 1,523
-------- -------- -------
Total current assets......................... 19,331 (2,923) 16,408
PROPERTY AND EQUIPMENT, net............................ 5,116 3,407 (A) 8,523
INTANGIBLE ASSETS, net................................. 1,749 16,673 (A) 18,422
OTHER NON CURRENT ASSETS............................... 1,203 203 (A) 1,406
-------- -------- -------
Total assets................................. $ 27,399 $ 17,360 $44,759
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities............. $ 7,155 $ 2,798 (A) $ 9,953
Short-term obligations............................... 47 88 (A) 135
Current maturities of long-term obligations.......... 227 243 (A) 470
-------- -------- -------
Total current liabilities.................... 7,429 3,129 10,558
LONG-TERM OBLIGATIONS, net of current.................. 634 10,687 (A) 11,321
DEFERRED INCOME TAXES, net............................. 129 88 (A) 217
OTHER NON CURRENT LIABILITIES..........................
-------- -------- -------
Total liabilities............................ 8,192 13,904 22,096
STOCKHOLDERS' EQUITY
Preferred Stock...................................... -- -- --
Common Stock......................................... 53 3 (A) 56
Additional paid-in capital........................... 18,756 3,453 (A) 22,209
Retained earnings.................................... 398 -- 398
-------- -------- -------
Total stockholders' equity................... 19,207 3,456 22,663
-------- -------- -------
Total liabilities and stockholders' equity... $ 27,399 $ 17,360 $44,759
======== ======== =======
</TABLE>
F-31
<PAGE> 36
F.Y.I. INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR DECEMBER 31, 1995 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
F.Y.I. FOUNDING NEW PRO FORMA
INCORPORATED COMPANIES ADJUST ACQUISITIONS ADJUST COMBINED
------------ --------- ------ ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenue........................ $ -- $40,615 $ -- $ 21,470 $ -- $62,085
Product revenue........................ -- 6,138 -- 1,550 -- 7,688
Other revenue.......................... -- 873 -- 35 -- 908
------ ------ ------ ------ ------ ------
Total revenue.................... -- 47,626 -- 23,055 -- 70,681
COST OF SERVICES......................... -- 25,937 -- 12,719 38,656
COST OF PRODUCTS SOLD.................... -- 4,972 -- 1,250 6,222
DEPRECIATION............................. -- 1,238 -- 644 (305)(B) 1,577
------ ------ ------ ------ ------ ------
Gross profit..................... -- 15,479 -- 8,442 305 24,226
SELLING, GENERAL AND ADMINISTRATIVE...... -- 12,489 (1,976)(F) 4,815 563 (B) 15,513
(378)(C)
------ ------ ------ ------ ------ ------
Operating income................. -- 2,990 1,976 3,627 120 8,713
OTHER (INCOME) EXPENSE:
Interest expense....................... -- 492 -- 225 733 (H) 1,450
Interest income........................ -- (139) -- (58) (197)
Other.................................. -- (214) -- 7 (207)
------ ------ ------ ------ ------ ------
Income before income taxes....... -- 2,851 1,976 3,453 (613) 7,667
PROVISION FOR INCOME TAXES............... -- 163 1,631 (G) 72 1,064 (D) 2,930
------ ------ ------ ------ ------ ------
NET INCOME............................... $ -- $ 2,688 $ 345 $ 3,381 $(1,677) $ 4,737
====== ====== ====== ====== ====== ======
NET INCOME PER COMMON SHARE.............. $ 0.86
======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING............................ 5,286 253 (E) 5,539
====== ====== ======
</TABLE>
F-32
<PAGE> 37
F.Y.I. INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS MARCH 31, 1996 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
F.Y.I. FOUNDING NEW PRO FORMA
INCORPORATED COMPANIES ADJUST ACQUISITIONS ADJUST COMBINED
------------ --------- ------ ------------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenue............................ $7,407 $ 3,487 $ -- $5,985 $ -- $16,879
Product revenue............................ 913 395 -- 271 -- 1,579
Other revenue.............................. 93 35 -- 11 -- 139
------ ------- ----- ------ ----- -------
Total revenue........................ 8,413 3,917 -- 6,267 -- 18,597
COST OF SERVICES............................. 4,701 2,195 -- 3,618 10,514
COST OF PRODUCTS SOLD........................ 718 308 -- 236 -- 1,262
DEPRECIATION................................. 212 91 -- 170 (77)(B) 396
------ ------- ----- ------ ----- -------
Gross profit......................... 2,782 1,323 -- 2,243 77 6,425
SELLING, GENERAL AND ADMINISTRATIVE.......... 2,253 1,503 (683 )(F) 1,206 (88)(C) 4,331
140 (B)
------ ------- ----- ------ ----- -------
Operating income..................... 529 (180) 683 1,037 25 2,094
OTHER (INCOME) EXPENSE
Interest expense........................... 14 24 -- 43 180 (H) 261
Interest income............................ (106) -- -- (7) -- (113)
Other...................................... (39) (69) -- (15) -- (C) (123)
------ ------- ----- ------ ----- -------
Income before income taxes........... 660 (135) 683 1,016 (155) 2,069
PROVISION FOR INCOME TAXES................... 262 (130) 351 (G) 21 323 (D) 827
------ ------- ----- ------ ----- -------
NET INCOME................................... $ 398 $ (5) $ 332 $ 995 $(478) $ 1,242
====== ======= ===== ====== ===== =======
NET INCOME PER COMMON SHARE.................. $ 0.08 $ 0.22
====== =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING... 5,286 253 (E) 5,539
====== ===== =======
</TABLE>
F-33
<PAGE> 38
NOTES TO PRO FORMA FINANCIAL STATEMENTS
THE PRO FORMA ADJUSTMENTS TO THE ACCOMPANYING BALANCE SHEET AS OF MARCH 31,
1996 ARE SUMMARIZED AS BELOW:
A. To record the purchase of B&B, Premier and Cook assets and liabilities
including the preliminary allocation of the purchase price (including
estimated direct costs) and the disbursement of $15,522,000 cash and
issuance of 253,252 shares of Common Stock to consummate the acquisitions.
The estimated fair market values reflected below are based on preliminary
estimates and assumptions and are subject to revision. In management's
opinion, the preliminary allocation is not expected to be materially
different than the final allocation. The fair market value of the shares of
Common Stock used in calculating the Consideration Paid was $13.65 which is
based on a 35% discount from the average trading price of the Common Stock
based on the length and type of restrictions in the purchase agreements.
<TABLE>
<S> <C>
Consideration Paid............................................... 18,979,000
Estimated Fair Value of Assets................................... 8,060,000
Estimated Fair Value of Liabilities.............................. 5,754,000
Goodwill......................................................... 16,673,000
</TABLE>
All intangibles are considered enterprise goodwill. Based on the historical
profitability of the purchased companies and the trends in the legal,
healthcare and other industries to outsource document management functions
further in the foreseeable future, the enterprise goodwill will be
amortized over a period of 30 years. The carrying value of intangible
assets will be reviewed at each reporting period on an acquisition by
acquisition basis to determine if facts and circumstances exist which would
suggest that the intangible assets may be impaired or that the amortization
period needs to be modified.
THE PRO FORMA ADJUSTMENTS TO THE ACCOMPANYING STATEMENTS OF OPERATIONS ARE
SUMMARIZED BELOW:
B. Adjustment to depreciation and amortization expense related to the
preliminary purchase price allocations described above.
C. To record the difference between the compensation paid to the stockholders
of B&B and Premier for the historical periods presented and the F.Y.I.
employment contract compensation to the stockholders.
D. Adjustment of the federal and state income tax provisions based on the pro
forma combined operations.
E. To adjust the weighted average shares outstanding to reflect the pro forma
effect of the shares issued for the purchase of B&B and Premier.
F. To record the difference between the compensation paid to the stockholders'
of the Founding Companies and the F.Y.I. employment contract compensation
for the one month ended January 31, 1996 and the year ended December 31,
1995.
G. Adjustment of the federal and state income tax provisions based on the pro
forma combined operations of F.Y.I. and the Founding Companies.
H. To record interest expense on the $8,150,000 term debt issued for the
purchase of Cook. Proceeds remaining from the Offering were used for the
purchase of B&B and Premier, and a portion of Cook.
Statements throughout this Registration Statement that state the Company's
or management's intentions, hopes, beliefs, anticipations, expectations or
predictions of the future are forward-looking statements. It is important to
note that the Company's actual results could differ materially from those
projected in such forward-looking statements. Additional information concerning
factors that could cause actual results to differ materially from those in the
forward-looking statements is contained in the Risk Factor section of this
Registration Statement.
F-34
<PAGE> 39
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: July 5, 1996
F.Y.I. INCORPORATED
By: /s/ Ed H. Bowman, Jr.
-------------------------------------
Ed H. Bowman, Jr.
President and Chief Executive Officer
<PAGE> 40
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
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.(1)
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.(1)
10.19 Asset Purchase Agreement, dated as of June 28, 1996,
by and among F.Y.I. Incorporated, Robert A. Cook
Acquisition Corp., Robert A. Cook and Staff, Inc. and
RAC Services, Inc., Robert A. Cook and Robert A.
Cook and Anna M. Cook, as Co-Trustees of the Cook
1993 Living Trust.
10.20 First Amendment to Credit Agreement, dated as of June
26, 1996, by and among F.Y.I. Incorporated and its
subsidiaries and Banque Paribas, IB55 Sweden Bank &
Trust, and First Source Financial LLP.
10.21 Warrant issued to Ed H. Bowman, Jr.
10.22 Warrant issued to Robert C. Irvine.
21.1 List of subsidiaries of F.Y.I. Incorporated
23.1 Consent of Arthur Andersen LLP
23.4 Consent of C.W. Amos & Company, LLC
23.5 Consent of Moss Adams, LLP
(1) Previously filed as an exhibit to the Company's
Current Report on Form 8-K filed on June 14, 1996 and
incorporated herein by reference.
</TABLE>
<PAGE> 1
EXHIBIT 10.19
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 28th day of June, 1996, by and among ROBERT A. COOK AND STAFF,
INC. and RAC SERVICES, INC., each a California corporation with its principal
offices located at 2025 Gateway Place, Suite 330, San Jose, California 95110
(each of Robert A. Cook and Staff, Inc. and RAC Services, Inc. a "Seller" and
collectively, "Sellers"), ROBERT A. COOK, ROBERT A. COOK AND ANNA M. COOK AS
CO- TRUSTEES OF THE COOK 1993 LIVING TRUST, constituting all of the
shareholders of Sellers (collectively, "Shareholder"), ROBERT A. COOK
ACQUISITION CORP. ("Cook Acquisition"), a Delaware corporation with its
principal offices at 3232 McKinney Avenue, Suite 900, Dallas, Texas 75204, RAC
(California) ACQUISITION CORP. ("RAC Acquisition"), a Delaware corporation with
its principal offices at 3232 McKinney Avenue, Suite 900, Dallas, Texas 75204
(each of Cook Acquisition and RAC Acquisition a "Buyer" and collectively,
"Buyers"), and solely for the purposes of Articles IV and VI, Section 8.3,
Section 11.5 and Section 12.1 hereof, F.Y.I. INCORPORATED, a Delaware
corporation with its principal offices at 3232 McKinney Avenue, Suite 900,
Dallas, Texas 75204 ("FYI").
WHEREAS, Sellers desire to sell to Buyers, and Buyers desire to buy
from Sellers, substantially all of the assets of the litigation support
business conducted by Sellers (the "Business"); and
WHEREAS, in connection with the purchase by Buyers from Sellers of the
assets described herein, (i) Buyers and Sellers will enter into a
noncompetition agreement (the "Seller Noncompetition Agreement"), (ii) Buyers
and Robert A. Cook will enter into a noncompetition agreement (the
"Shareholder Noncompetition Agreement" and collectively with the Seller
Noncompetition Agreement, the "Noncompetition Agreements"), and (iii) Robert A.
Cook will enter into a consulting agreement with Buyers (the "Shareholder
Consulting Agreement").
NOW, THEREFORE, for and in consideration of the mutual
representations, warranties, covenants and agreements hereinafter set forth and
other good and valuable consideration, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of Assets. At the Closing (as that term
is defined in Section 9.1), Robert A. Cook and Staff, Inc. will sell, convey,
transfer, assign and deliver to Cook Acquisition, and Cook Acquisition will
acquire and accept from Robert A. Cook and Staff, Inc., and RAC Services, Inc.
will sell, convey, transfer, assign and deliver to RAC Acquisition, and RAC
Acquisition will acquire and accept from RAC Services, Inc., the following
assets and
<PAGE> 2
properties, free and clear of any and all options, pledges, mortgages, security
interests, liens, charges, adverse claims, rights, restrictions, burdens and
encumbrances whatsoever ("Encumbrances"):
(a) All of the real property leasehold interests of such Seller
described on Schedule 1.1A;
(b) All of the personal property of such Seller located on the
real property described on Schedule 1.1A and all other
tangible assets and properties of such Seller, wherever
located and whether or not described or referred to herein,
including, without limitation, all equipment, machinery,
tools, vehicles, inventories (including raw materials,
work-in-process, finished goods, other than finished goods
delivered by such Seller to others under consignment,
supplies in store, maintenance items and parts (which
hereinafter shall sometimes be collectively referred to as
the "Inventory")), prepaid accounts and prepaid expenses,
furniture, fixtures, fixed assets, books, reports and
records (including customer lists);
(c) The customer accounts, contracts, leases, franchises,
arrangements and commitments listed on Schedule 1.1B and no
others;
(d) All intangible properties and rights (other than contracts,
leases, arrangements and commitments), wherever located and
whether or not described or referred to herein, including,
without limitation, all know-how, trade secrets, technology,
all patents and patent applications and rights and licenses
thereunder, trade names, trademark registrations and
applications, common law trademarks, servicemarks,
copyrights and copyright registrations and applications;
(e) All transferable licenses, permits, certificates and
authorizations relating to the Business operations of such
Seller;
(f) All accounts receivable, evidences of indebtedness and
choses-in-action of such Seller; and
(g) Any other property or right, tangible or intangible, of such
Seller used in the Business (the items in (a) through (g)
hereof hereinafter collectively referred to as the
"Assets");
provided, however, that such Seller will not sell, convey, transfer, assign or
deliver to the applicable Buyer, and the applicable Buyer will not acquire from
such Seller, any and all contracts, leases, arrangements and commitments not
listed on Schedule 1.1B and the assets, properties and rights listed on
Schedule 1.1C (collectively, the "Excluded Assets").
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1.2 Transfer and Conveyance. Sellers shall execute and deliver
to Buyers at the Closing Bills of Sale and Assignment in substantially the
forms attached hereto as Exhibit A-1 and A-2 and all such other assignments,
endorsements and instruments of transfer as shall be necessary or appropriate
to carry out the intent of this Agreement and as shall be sufficient to vest in
Buyers title to all of the Assets and all right, title and interest of Sellers
thereto.
1.3 Assumption of Certain Obligations. Effective at the Closing
and subject to the terms set forth herein, at the Closing Cook Acquisition
shall assume and be liable for the obligations of Robert A. Cook and Staff,
Inc. to render performance arising after May 31, 1996 (the "Effective Date")
under the contracts, leases, arrangements and commitments of Robert A. Cook and
Staff, Inc. listed on Schedule 1.1B, and RAC Acquisition shall assume and be
liable for the obligations of RAC Services, Inc. to render performance arising
after the Effective Date under the contracts, leases, arrangements and
commitments of RAC Services, Inc. listed on Schedule 1.1B (collectively, the
"Assumed Liabilities") (but not any obligation for default or nonperformance
under said contracts, leases, arrangements and commitments arising prior to the
Closing). Buyers will not assume and will not be liable for any other debts,
contracts, leases, liabilities, arrangements, commitments, obligations,
restrictions, disabilities or duties of Sellers, other than those arising at or
after the Effective Date under the Assumed Liabilities listed on Schedule 1.1B.
Buyers shall execute and deliver to Sellers at the Closing Assumption
Agreements in substantially the form attached hereto as Exhibits B-1 and B-2.
ARTICLE II
PURCHASE PRICE AND OTHER PAYMENTS
2.1 Cash Purchase Price. The aggregate purchase price for the
Assets (the "Purchase Price") shall be $11,400,000.00.
2.2 Allocation of Purchase Price; Adjustment of Purchase Price.
The Purchase Price shall be allocated among the Assets as set forth on Schedule
2.2.
2.3 Method of Payment of Purchase Price; Other Amounts Payable
at the Closing. At the Closing, Buyers shall deliver to Sellers by certified
check or wire transfer of next business day funds to a bank account or bank
accounts designated by Sellers the aggregate amount of $10,400,001.00. The
balance of $1,000,000.00 of the Purchase Price shall be retained by Buyers for
a period of ninety (90) days from the date of the Closing as security and as an
offset for any breach of the representations, warranties, covenants and
agreements of Sellers and Shareholder and for Sellers' and Shareholder's
indemnification obligations, each as set forth herein, following which time
such amount shall be delivered to Sellers by certified check or wire transfer
to a bank account or bank accounts designated by Sellers.
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2.4 Stub Amounts to Buyer. All net earnings and net cash flow
of each Seller with respect to the Business (other than earnings and cash flow
in the Excluded Assets) for the period from and after the Effective Date and
through the Closing Date shall be for the benefit of the applicable Buyer and
shall be included in the Assets conveyed to such Buyer at the Closing.
2.5 Bank Accounts. At or immediately prior to the Closing
Sellers shall withdraw an aggregate of $1,300,000.00 from the bank accounts to
be conveyed to Buyers as a portion of the Assets pursuant to this Agreement.
Within ninety (90) days following the Closing, Buyers and Sellers shall effect
reconciliations of such accounts at the Effective Date, with any excess amount
in such bank accounts delivered to Buyers at the Closing as determined by the
reconciliations (net of the monies withdrawn by Sellers) being promptly
returned by Buyers to Sellers, and any shortage in such bank accounts delivered
to Buyers at the Closing as determined by the reconciliations (net of the
monies withdrawn by Sellers) being promptly delivered by Sellers to Buyers (or,
at Buyers' option, being deducted by Buyers from that portion of the Purchase
Price retained pursuant to Section 2.3 hereof).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND SHAREHOLDER
Each Seller and Shareholder, jointly and severally, represents and
warrants to Buyers as follows:
3.1 Due Organization and Qualification. Each Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, and has all requisite corporate power and
authority to own or lease its properties and to carry on its business as it is
presently being operated and in the place where such properties are owned or
leased and such business is conducted.
3.2 Title. Each Seller has, and upon conveyance of the Assets
to the applicable Buyer by Seller at the Closing, such Buyer will acquire and
hold good title to all interests in the leased properties as described in the
instruments of lease referred to in Schedule 1.1A, and good title to all of the
other Assets, whether real, personal or mixed, described in Schedule 3.2A as
owned by it, free and clear of any and all Encumbrances except as set forth on
Schedule 3.2A.
3.3 Inventory. The Inventory consists of current items of a
quality and quantity that are usable or marketable in the ordinary course of
the business of Sellers and items not usable in the business of Sellers have
been written down in value in accordance with the normal business practice of
Sellers to estimated net realizable market values.
3.4 Physical Properties. Set forth on Schedule 3.2A is a
description of (i) all vehicles owned or leased by Sellers and included among
the Assets (showing motor vehicle identification
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<PAGE> 5
numbers and whether owned or leased), (ii) all production and warehouse
machinery and equipment owned or leased by Sellers and included among the
Assets and (iii) all physical properties (other than the types of properties
referred to in (i) and (ii) above), real, personal or mixed, owned by or leased
to Sellers and included among the Assets, having an original cost in excess of
$1,000.00 (exclusive of Inventory). Sellers enjoy peaceable possession of all
properties owned or leased thereby.
3.5 Trademarks, Etc. Set forth on Schedule 3.5 is a list of all
trade names, trademark and servicemark registrations and applications or
registered trade dress rights, common law trademarks, United States and foreign
patents and patent applications and copyright registrations and applications
owned or used by Sellers or which they licensed to use or under which they
possess any rights ("Trademark and Patent Rights"). None of the products,
activities or operations of Sellers infringe, involve or have resulted in (i)
infringement of, or (ii) any claim or infringement of, any patent or patent
application, trade name, trademark or service mark registration or application,
common law trademark or trade dress rights, copyright or copyright registration
or application of any other person, firm or corporation; and no proceedings
have been instituted, are pending, or, to the best knowledge of Sellers and
Shareholder, threatened, which challenge the rights of Sellers in respect
thereof. None of the Trademark and Patent Rights, to the best of each Seller's
and Shareholder's knowledge, are being infringed by the products, activities,
operations, trade names, trademarks, service marks, trade dress rights or
copyrights of any other person or persons and none are subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof. Neither Seller has given or is bound by an agreement of
indemnification for patent, trade name, service mark, trademark or copyright
infringement as to any property produced, used or sold by it.
3.6 Compliance with Laws. Sellers (i) have complied with all
laws, regulations, licensing requirements and orders applicable to business or
personnel, (ii) have filed with the proper authorities all statements and
reports required by the laws, regulations, licensing requirements and orders to
which they or any of their employees (because of their activities on behalf of
their employers) are subject, and (iii) possess all necessary licenses,
franchises, permits and governmental authorizations to conduct their business
in the manner in which and in the jurisdictions and places where such
businesses are now conducted. Set forth on Schedule 3.6 is a list of all
material licenses, franchises, permits and governmental authorizations and all
applications pending before any agency or authority for the issuance of any
licenses, franchises, permits or governmental authorizations or the renewal
thereof.
3.7 Contracts. Set forth on Schedule 3.7 is a list of all
contracts, leases, arrangements and commitments (whether oral or written) by
which any of the Assets are directly affected or are bound. Except as set
forth on Schedule 3.7, neither Sellers nor any of the Assets is a party to or
is bound or affected by any contract, lease, arrangement or commitment (whether
oral or written) relating to: (i) the employment of any person other than
personnel employed at the pleasure of Sellers in the ordinary course of their
business at rates of compensation and on terms consistent with good business
practice; (ii) collective bargaining with, or any representation of any
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<PAGE> 6
employees by, any labor union or association; (iii) the acquisition of
services, supplies, equipment or other personal property involving more than
$5,000.00 or that is not terminable by a Seller upon not more than thirty (30)
days' notice without obligation on the part of such Seller; (iv) the purchase,
sale or lease of real property; (v) distribution, agency or construction; (vi)
lease of real or personal property as lessor or lessee or sublessor or
sublessee; (vii) lending or advancing of funds other than the extension of
credit to trade purchasers in the ordinary course of a Seller's business
consistent with good business practice; (viii) borrowing of funds or receipt of
credit other than by a Seller in the ordinary course of business consistent
with good business practice and except for trade payables in amounts and on
terms consistent with past practice; (ix) incurring of any obligation or
liability except for transactions engaged in by a Seller in the ordinary course
of their business consistent with good business practice; (x) the sale of
personal property (other than sales of Inventory in the ordinary course of
business consistent with good business practice) or services under which
payments due after the date of this Agreement exceed $5,000.00; and (xi) any
matter or transaction not in the ordinary course of the business of a Seller or
that is inconsistent with past business practice of such Seller.
3.8 Contract Defaults. Neither Seller is in default in any
material respect under any of the contracts, leases, arrangements and
commitments listed on Schedule 3.7, and such contracts, leases, arrangements
and commitments are legal, valid and binding obligations of the respective
parties thereto in accordance with their terms and, except to the extent
reflected in Schedule 3.7, have not been amended; and no defenses, offsets or
counterclaims thereto have been asserted or to the best knowledge of each
Seller and Shareholder, may be made, by any party thereto other than Sellers
nor has either Seller waived any substantial rights thereunder.
3.9 Litigation. Set forth on Schedule 3.9 is a list of all
actions, suits, proceedings, investigations or grievances pending against
Sellers or, to the best knowledge of each Seller and Shareholder, threatened
against either Seller, the business or any property or rights of a Seller, at
law or in equity or 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 3.9 either (i) results or
would, if adversely determined, result in any material adverse change in the
business, operations or assets or the condition, financial or otherwise, or
results of operations of a Seller or (ii) affects or would, if adversely
determined, affect the right or ability of a Seller to carry on its business
substantially as now conducted. Neither Seller is subject to any continuing
court or Agency order, writ, injunction or decree applicable specifically to
the Assets, the business operations of such Seller or employees of such Seller,
or in default with respect to any order, writ, injunction or decree of any
court or Agency with respect to the Assets, its business, operations or
employees.
3.10 Corporate Power and Authority. The execution, delivery and
performance of this Agreement by Sellers, and all other agreements by and among
the parties, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action and no
further action or approval is required in order to permit Sellers
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<PAGE> 7
to consummate the transactions contemplated hereby and thereby. This Agreement
constitutes, and all other agreements by and among the parties, when executed
and delivered in accordance with the terms thereof, will constitute the legal,
valid and binding obligations of each Seller, enforceable in accordance with
their terms. Each Seller has full power, authority and legal right to enter
into this Agreement, and all other agreements by and among the parties, and to
consummate the transactions contemplated hereby and thereby. The making and
performance of this Agreement, and all other agreements by and among the
parties, and the consummation of the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof will not (i) conflict
with the Articles of Incorporation or the Bylaws of Sellers (collectively,
"Sellers' Charter Documents"), (ii) result in any breach or termination of, or
constitute a default under, or constitute an event that with notice or lapse of
time, or both, would become a default under, or result in the creation of any
Encumbrance upon any of the Assets under, or create any rights of termination,
cancellation or acceleration in any person under, any contract, lease,
arrangement or commitment, or violate any order, writ, injunction or decree, to
which either Seller is a party, by which any of the Assets, business or
operations of a Seller may be bound or affected or under which any of the
Assets, business or operations of a Seller receive benefits, (iii) result in
the loss or adverse modification of any license, franchise, permit or other
authorization granted to or otherwise held by a Seller and related to its
business operations or (iv) result in the violation of any provisions of law
applicable to a Seller, the violation of which could have an adverse effect
upon the Assets, business or operations of such Seller.
3.11 Financial Condition and Results of Operations. Each Seller
has delivered to Buyers its balance sheet as of December 31, 1995 for RAC
Services, Inc. and as of June 30, 1995 for Robert Cook and Staff, Inc. and the
related statements of operations, stockholder's equity and cash flows for the
three (3) fiscal years then ended, together with the balance sheet of such
Seller at May 31, 1996, and the related statements of income, cash flow and
operating expenses for the three-month period then ended, all of which are set
forth on Schedule 3.11 (collectively, the "Financial Statements"). The
Financial Statements (i) are accurate and in accordance with the books and
records and accounting methods of Sellers, (ii) constitute true, full and
complete disclosure of the financial position and results of operations of
Sellers as of the dates and for the periods indicated and (iii) have been
prepared in accordance with accounting principles consistently applied
throughout the periods involved except as noted therein. Except as may be set
forth on the Financial Statements or otherwise disclosed herein, there are no
liabilities, contingent or otherwise, by which either Seller or any of the
Assets or the Business may be bound or affected other than those incurred in
the ordinary course of business consistent with good business practice and
which are not materially adverse.
3.12 Employee Benefits. 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 either Seller or any of
the Group Members of Sellers (as defined below) (collectively, the "Plans") is
listed on Schedule 3.12, 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
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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
Sellers 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 Sellers 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 Seller that have not been paid have been
properly recorded on the Financials 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. Neither Seller and, to the best knowledge of
each Seller and Shareholder, 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, or litigation has been made, commenced or, to the best
knowledge of each Seller and Shareholder, 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 Sellers 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 in Schedule 3.12, neither the
execution and delivery of this Agreement by Sellers or the consummation of the
transactions contemplated hereby will (i) entitle any current or former
employee of Sellers 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 Sellers, any member of any "controlled group
of corporations" as defined in Section 1563 of the Code that includes either
Seller, or any member of any group of "trades or businesses under common
control" as defined by Section 414(c) of the Code that includes either Seller.
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3.13 Employees; Employee Relations.
(a) Schedule 3.13 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
Sellers to each employee whose current total annual compensation or estimated
compensation is $15,000.00 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 Sellers to each such person, (iii) any increase to
become payable after the date of this Agreement by Sellers to employees other
than those specified in clause (i) of this Section 3.13(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 Sellers to, or made
to Sellers by, any director, officer or employee, (v) all other transactions
between a Seller and any director, officer or employee of such Seller since
December 31, 1995, and (vi) all accrued but unpaid flex-time off owing to any
officer or employee as of May 31, 1996 that is not disclosed on the Financial
Statements.
(b) Except as disclosed on Schedule 3.13, neither Seller
is a party to, or bound by, the terms of any collective bargaining agreement,
and neither Seller has experienced any material labor difficulties during the
last five years. Except as set forth on Schedule 3.13, there are no labor
disputes existing, or to the best knowledge of Sellers, 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 each Seller and
Shareholder, are threatened.
(c) Each Seller's relationship with its respective
employees is good. Except as disclosed on Schedule 3.13, neither Seller is 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 each Seller and Shareholder, 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. Neither Seller is
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
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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 Sellers.
(d) Since December 31, 1994 neither Seller has incurred
any liability or obligation under the Worker Adjustment and Retraining
Notification Act or similar state laws. Neither Seller has 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.
3.14 Environmental Laws and Regulations.
(a) (i) During the occupancy and operation of the
"Subject Property" (as defined below) by Sellers and, to the best knowledge of
Sellers and Shareholder, 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 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 Sellers, or, to the best
knowledge of each Seller and Shareholder, 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 Sellers and
Shareholder, 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 Sellers 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; and (v) to the best knowledge of Sellers and Shareholders, there
are no above-ground or underground storage tank systems located at 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
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regulations promulgated thereunder; (ii) petroleum and petroleum
by-products; (iii) asbestos or asbestos- containing material ("ACM");
or (iv) 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.
3.15 Consents. Except as set forth on Schedule 3.15, no consent,
approval, authorization or order of any court, Agency or any other person is
required in order to permit Sellers to consummate the transactions contemplated
by this Agreement. With respect to the CSAA Contract (as defined in Section
7.6 hereof), neither Seller nor Shareholder has any knowledge as to whether
CSAA will terminate the CSAA Contract following consummation of the
transactions contemplated hereby and the proposed assignment thereof by Sellers
to Buyers.
3.16 Insurance. Each Seller is adequately insured with
responsible insurers in respect of its properties against business risks
normally insured against by companies in similar lines of business. Set forth
on Schedule 3.16 attached hereto is a summary description of all policies of
fire, casualty, liability and other forms of insurance and all fidelity bonds
held by Sellers.
3.17 Taxes. Each Seller has duly filed all federal, state,
county, local and other excise, franchise, property, payroll, income, capital
stock, sales and use and other tax returns that are required to be filed by it
and such returns are true, correct and complete in all respects. Each Seller
has paid all taxes which have become due or have been assessed against it and
all taxes, penalties and interest which any taxing authority has proposed or
asserted to be owing. All tax liabilities to which the properties of Sellers
may have been subjected have been discharged except for taxes assessed but not
yet payable. There are no tax claims presently being asserted against Sellers
and Sellers know of no basis for any such claim. Neither Seller has granted
any extension to any taxing authority of the limitation period during which any
tax liability may be asserted thereby.
3.18 Business Relations. Schedule 3.18 contains an accurate list
of all significant customers of the Business (i.e., those customers
representing 5% or more of either Seller's revenues for the twelve (12) months
ended March 31, 1996). Except as set forth in Schedule 3.18, neither Seller
has experienced any difficulties in obtaining any inventory items necessary to
the operation of its business, and, to the best knowledge of each Seller and
Shareholder, no such shortage of supply of inventory items is threatened or
pending. Neither Seller is 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.
3.19 Absence of Certain Changes or Events. Since December 31,
1995, neither Seller has (i) suffered any extraordinary losses or waived any
rights of substantial value; (ii) amended its Articles of Incorporation or
Bylaws; (iii) made any change in its mode of management or any change in its
method of operation or method of accounting; (iv) made or become obligated to
make any capital expenditures other than such expenditures or commitments not
exceeding
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$5,000.00 in the aggregate; (v) experienced or suffered any adverse change in
its business, operations or assets (whether or not covered by insurance),
condition, financial or otherwise, or results of operations; (vi) entered into
any transaction, except in the ordinary course of its business consistent with
good business practice; (vii) received any notice of any claim asserted against
it by any Agency that could have a material adverse effect on the business or
financial condition of such Seller; or (viii) incurred or agreed to incur any
material obligation outside the ordinary course of business that has not
heretofore been disclosed in writing to Buyers.
3.20 True, Correct and Complete Information. The information
furnished to Buyers by Sellers prior to, at or after the date of this Agreement
and in any Schedule referred to herein is true, correct and complete in all
material respects. Such information states all material facts required to be
stated therein or with respect thereto or necessary to make the statements
therein or with respect thereto, in light of the circumstances under which such
statements are made, true, correct and complete.
3.21 Availability of Documents. Sellers have made available for
inspection by Buyers at the offices of Sellers true, correct and complete
copies of Sellers' Charter Documents and all contracts, leases, arrangements,
commitments and documents referred to herein or in any Schedule referred to
herein, in each case together with all amendments and supplements thereto.
3.22 Broker's and Finder's Fees. Neither Seller has made any
agreement with any person, or taken any action which would cause any person, to
become entitled to an agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.
3.23 Accounts Receivable; Evidences of Indebtedness. Set forth
on Schedule 3.23 is a list of all accounts receivable, promissory notes,
contract rights, commercial paper, debt securities and other rights to receive
money ("Receivables") reflected as assets of Seller in the Financial Statements
as of May 31, 1996, showing the name of the account debtor, maker or obligor,
the unpaid balance, the age of the Receivable and, if applicable, the maturity
date, the interest rate and the collateral securing the obligation. All
Receivables reflected in the Financial Statements or acquired since that date
are legal, valid and binding obligations of the obligors and, except as set
forth on Schedule 3.23, Sellers have no knowledge of any fact impairing the
collectability of such Receivables in accordance with their terms. Since
December 31, 1995, neither Seller has acquired or permitted to be created any
Receivables except in the ordinary course of its business consistent with past
practice. Notwithstanding the above, neither Sellers nor Shareholder represent
or warrant the collectability of the Receivables.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FYI AND BUYERS
Each Buyer and FYI, jointly and severally, represent and warrant to
Sellers and Shareholder as follows:
4.1 Organization and Authority. Each Buyer and FYI is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own or lease its properties and to carry on its business as it is
presently being operated and in the place where such properties are owned or
leased and such business is conducted. The execution, delivery and performance
of this Agreement by Buyers, and all other agreements by and among the parties,
and the consummation by Buyers of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate action and no
further action or approval is required in order to permit Buyers to consummate
the transactions contemplated hereby and thereby. This Agreement constitutes,
and all other agreements by and among the parties, when executed and delivered
in accordance with the terms thereof, will constitute the legal, valid and
binding obligations of Buyers, enforceable in accordance with their terms.
Buyers have full power, authority and legal right to enter into this Agreement
and all other agreements by and among the parties and to consummate the
transactions contemplated hereby and thereby. The making and performance of
this Agreement, and all other agreements by and among the parties, and the
consummation of the transactions contemplated hereby and thereby in accordance
with the terms hereof and thereof will not (i) conflict with the Certificates
of Incorporation or the Bylaws of Buyers (collectively, "Buyers' Charter
Documents"), (ii) result in any breach or termination of, or constitute a
default under, or constitute an event which with notice or lapse of time, or
both, would become a default under, or result in the creation of any
Encumbrance upon any asset of Buyers under, or create any rights of
termination, cancellation or acceleration in any person under, any contract,
lease, arrangement or commitment, or violate any order, writ, injunction or
decree, to which either Buyer is a party or by which such Buyer or its assets,
business or operations may be bound or affected or under which such Buyer or
its assets, business or operations receive benefits, (iii) result in the loss
or adverse modification of any material license, franchise, permit or other
authorization granted to or otherwise held by Buyers that is material to the
business or financial condition of Buyers or (iv) result in the violation of
any provisions of law applicable to Buyers, the violation of which could have a
material adverse effect upon the business, operations or assets of Buyers.
4.2 Consents. No consent, approval, authorization or order of
any court, Agency or any other person is required in order to permit Buyers to
consummate the transactions contemplated by this Agreement.
4.3 Broker's and Finder's Fees. Neither Buyer has made any
agreement with any person, or taken any action that would cause any person, to
become entitled to an agent's,
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broker's or finder's fee or commission in connection with the transactions
contemplated by this Agreement.
4.4 Litigation. There is no pending or threatened litigation in
any court or any proceeding before any Agency (i) in which it is sought to
restrain, prohibit, invalidate or obtain damages in respect of the consummation
of the purchase and sale of the Assets or the other transactions contemplated
hereby, (ii) that could, if adversely determined, result in any material
adverse change in the business, operations or assets or the condition,
financial or otherwise, or results of operations of Buyers or (iii) that could,
if adversely determined, have a material adverse effect on the right or ability
of Buyers to carry on their business substantially as now conducted.
4.5 Compliance with Laws. To the best of each Buyer's
knowledge, such Buyer (i) has complied with all laws, regulations, licensing
requirements and orders applicable to its business the breach or violation of
which could have a material adverse effect on said business, (ii) has filed
with the proper authorities all statements and reports required by the laws,
regulations, licensing requirements and orders to which it is subject and (iii)
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.
ARTICLE V
COVENANTS OF SELLERS AND SHAREHOLDER
Each Seller and Shareholder covenants and agrees with Buyers as
follows:
5.1 Affirmative Covenants. Prior to the Closing Date (as
hereinafter defined), each Seller will operate its business only in the usual,
regular and ordinary course of business consistent with past business
practices, and will use its best efforts to: (i) preserve intact its business
organization and the Assets; (ii) maintain its properties, machinery and
equipment in good operating condition and repair; (iii) continue all existing
policies of insurance (or comparable insurance) in full force and effect up to
and including the Closing Date (and will not cancel any such insurance or take
(or fail to take) any action that would enable the insurers under such policies
to avoid liability for claims arising out of any occurrence prior to the
Closing Date without the prior written consent of Buyers); (iv) use its best
efforts to keep available the services of its present officers, employees and
agents; (v) use its best efforts to preserve its present relationships with
lending and other financial institutions, suppliers and customers; and (vi)
maintain its books, accounts and records in the usual, regular and ordinary
manner on a basis consistently applied. Each Seller or Shareholder will notify
Buyers in writing within five (5) business days of learning of any facts, event
or circumstance that is reasonably likely to have a material adverse effect on
the business, operations, prospects, properties or condition (financial or
otherwise) of a Seller or on the Assets or the Business.
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5.2 Negative Covenants. Prior to the Closing Date, each Seller
will operate its business only in the usual, regular and ordinary course of
business consistent with past business practices, and will not, without the
prior written consent of Buyers: (i) make any increase in the compensation
payable or to become payable by it to any employee (other than salary increases
in the usual, regular and ordinary course of business and not to exceed $500.00
total per month) or contribute or make any commitment to or representation that
it will contribute any amounts to any bonus or other employee benefit plan for
employees of such Seller except as required by law or by the terms of any such
plan in the ordinary course of business; (ii) make any amendment to its
Articles of Incorporation, Bylaws or other organizational documents; (iii) make
any material change in the character of its business; (iv) incur any obligation
or liability (fixed or contingent) except in the ordinary course of business;
(v) discharge or satisfy any Encumbrance or pay any obligation or liability
(fixed or contingent) other than in the ordinary course of business; (vi)
mortgage, pledge, transfer or otherwise dispose of or subject to any
Encumbrance any of the Assets, except in the ordinary course of business; (vii)
acquire any assets or properties, except in the ordinary course of business;
(viii) cancel or compromise any material debt or claim; (ix) waive or release
any rights of material value; (x) transfer, grant or terminate contract, lease,
arrangement or commitment rights under any concessions, leases, licenses,
agreements, patents, patent licenses, inventions, trademarks, trade names,
service marks, trade dress or copyrights or registrations or licenses thereof
or applications therefor or with respect to any know-how or other proprietary
or trade rights; (xi) modify or change in any material respect or terminate any
existing contract, lease, arrangement or commitment required to be listed on
Schedule 1.1B; (xii) undertake any material borrowing of any nature whatsoever
other than in the ordinary course of business; (xiii) make any loans or
extensions of credit, except in the ordinary course of business; (xiv) make or
become obligated to make any capital expenditures or enter into commitments
therefor exceeding $5,000.00 in the aggregate; and (xv) sell, discount or
otherwise dispose of any accounts receivable. Nothing herein shall be deemed
to prevent Sellers from paying bonuses consistent with past business practices
as contemplated on Schedule 5.2.
5.3 Furnishing of Information by Sellers and Shareholder.
Sellers and Shareholder will keep Buyers promptly advised of all material
developments relevant to the consummation of the transactions contemplated
hereby and will cooperate fully with Buyers in bringing about the consummation
of the transactions contemplated hereby. Each Seller will update by amendment
or supplement each of the Schedules referred to herein and any other disclosure
in writing from such Seller required by this Agreement to be disclosed in
writing by a Seller to Buyers promptly upon any change in the information set
forth in such Schedules or other disclosures, and hereby represents and
warrants that such Schedules and such written disclosures, as so amended or
supplemented, shall be true, correct and complete as of the date or dates
thereof; provided, however, that the inclusion of any information in any such
amendment or supplement, not included in the original Schedule or other
disclosure at or prior to the date of this Agreement, shall not limit or impair
any right that Buyers might otherwise have respecting the representations or
warranties of Sellers and Shareholder contained in this Agreement. No
investigation pursuant to this Section 5.3 shall affect any representations or
warranties or the conditions to the obligations of Buyers to consummate the
transactions contemplated hereby.
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5.4 Employees of Sellers. Each Seller shall pay all salaries,
wages and bonuses, and all amounts due in lieu of holiday, sick or vacation pay
(flex-time off), to all employees of such Seller employed in the Business at
the Closing, and effective on the Closing Date shall terminate all of such
employees. Any such amounts applicable to the period from and after the
Effective Date shall be at the expense of the applicable Buyer and thereby
reduce the net earnings and net cash flow to be conveyed by Sellers to Buyers
at the Closing pursuant to Section 2.4 hereof. Each Seller shall be
responsible for all claims made by its employees for wages, salaries, bonuses,
pension, workmen's compensation, medical insurance, disability, vacation,
severance pay, pay in lieu of notice, sick benefits or other compensation or
benefit arrangements in respect of the service of such employees prior to the
Effective Date. At its option, to the extent permitted by applicable law, each
Seller may elect to pay the applicable Buyer for the accrued flex-time off pay
with respect to periods prior to the Effective Date otherwise payable to its
employees by deduction of a corresponding amount from the Purchase Price
payable to Sellers at the Closing.
5.5 Approvals of Third Parties. As soon as practicable after
the date hereof, each Seller and Shareholder will use its or his best efforts
to secure all necessary consents, approvals and clearances of third parties
(except the consent of the California State Auto Association ("CSAA") under the
CSAA Contract (as defined in Section 7.6 hereof)) that shall be required to
consummate the transactions contemplated hereby and will otherwise use its or
his best efforts to cause the consummation of such transactions in accordance
with the terms and conditions of this Agreement.
5.6 Notices. Each Seller will timely give all notices required
to be given relating to the transactions contemplated hereby, including without
limitation, (i) any notices required or requested to be given to all creditors
and claimants against such Seller and (ii) any notices required or requested to
be given pursuant to applicable bulk sales laws or similar laws.
5.7 Access to Books and Records. Each Seller agrees to provide
Buyers, their accountants, counsel and other representatives, during normal
business hours and upon reasonable notice, for a period of four (4) years after
the Closing Date, access to the books, records, income tax returns, contracts
and other underlying data and documentation of Seller relating to the period
prior to the Closing Date and to make available to Buyers' personnel of such
Seller in Buyers' review thereof for the purpose of enabling Buyers to
determine and calculate any tax liabilities in connection with the Assets.
Each Seller agrees that, for such four-year period, it will preserve and keep
intact all such books and records.
5.8 No Solicitation of Offers. Each Seller and Shareholder
covenants and agrees that it or he will not solicit, entertain, encourage or
assist any acquisition proposal with respect to the purchase or exchange of the
Assets or Business or any portion thereof, or with respect to any proposed
merger, consolidation, sale of securities or other acquisition involving such
Seller (an "Acquisition Proposal"), by or with any person other than Buyer or
its authorized designee until July 31, 1996. In the event that any Seller or
Shareholder receives such an Acquisition Proposal such Seller or Shareholder
shall notify Buyers within three (3) business days of the substance of any
inquiry or proposal received thereby.
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5.9 Capital Commitments. Each Seller covenants and agrees that
it will be liable for and will promptly pay for (i) all capital improvements
completed prior to or in progress at the Effective Date but unpaid at the
Closing Date and (ii) all assets or properties delivered to such Seller prior
to the Effective Date but unpaid at the Closing Date; provided, however, that
such Seller shall not be liable for the cost of installing any such assets or
properties if they are installed after the Effective Date.
5.10 Change of Name by Robert A. Cook and Staff, Inc. Upon
written request of Cook Acquisition within two (2) years following the Closing,
Robert A. Cook and Staff, Inc. shall promptly and in any event within thirty
(30) days following such request change its corporate name to a name other than
`Robert A. Cook and Staff, Inc.' or any variant thereof and promptly file
appropriate notification of its change of name as required by applicable law,
and shall execute and deliver to Cook Acquisition or its designee (i) an
assignment of any and all rights it has in, to and under such name and (ii) a
consent to the use by Cook Acquisition or its designee of such name in form
suitable for filing with the California Secretary of State; provided, however,
that Robert A. Cook and Staff, Inc. shall not be required to change its name
(but shall execute and deliver a consent as described in clause (ii) above) in
the event that at the time of such request Robert A. Cook and Staff, Inc. shall
commence corporate dissolution procedures pursuant to the applicable provisions
of the California Corporations Code.
ARTICLE VI
COVENANTS OF BUYERS
Each Buyer and FYI covenants and agrees with Sellers and Shareholder
as follows:
6.1 Furnishing of Information by Buyers. Buyers will keep
Sellers and Shareholder advised of all material developments relevant to the
consummation of the transactions contemplated hereby and will cooperate fully
with Sellers and Shareholder in bringing about the consummation of the
transactions contemplated hereby. Buyers will update by amendment or
supplement each of the Schedules referred to herein and any other disclosure in
writing from Buyers required by this Agreement to be disclosed in writing by
Buyers to Seller promptly upon any change in the information set forth in such
Schedules or other disclosures, and Buyers and FYI hereby represent and warrant
that such Schedules and such written disclosures, as so amended or
supplemented, shall be true, correct and complete as of the date or dates
thereof; provided, however, that the inclusion of any information in any such
amendment or supplement, not included in the original Schedule or other
disclosure at or prior to the date of this Agreement, shall not limit or impair
any right that Seller or Shareholder might otherwise have respecting the
representations or warranties of Buyers contained in this Agreement. No
investigation pursuant to this Section 6.1 shall affect any representations or
warranties or the conditions to the obligations of Sellers and Shareholder to
consummate the transactions contemplated hereby.
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6.2 Approvals of Third Parties. As soon as practicable after
the date hereof, each Buyer will use its best efforts to secure all necessary
consents, approvals and clearances of third parties that shall be required to
consummate the transactions contemplated hereby and will otherwise use its best
efforts to cause the consummation of such transactions in accordance with the
terms and conditions of this Agreement.
6.3 Access to Books and Records. Each Buyer agrees to provide
each Seller, its accountants, counsel and other representatives during normal
business hours and upon reasonable notice, for a period of four (4) years after
the Closing Date, access to the books, records, tax returns, contracts and
other underlying data and documentation of such Buyer relating to the period
prior to the Closing Date and to make available to such Seller personnel of
such Buyer in such Seller's review thereof for the purpose of enabling such
Seller to determine and calculate any tax liabilities for such period. Each
Buyer agrees that, for such four-year period, it will preserve and keep intact
all such books and records.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYERS
The obligations of Buyers to cause the purchase of the Assets and the
other transactions contemplated hereby to occur at Closing shall be subject to
the satisfaction on or prior to the Closing Date of all of the following
conditions, except such conditions as Buyers may waive in writing:
7.1 Representations and Warranties of Sellers and Shareholder.
All of the representations and warranties of Sellers and Shareholder contained
in this Agreement and in any Schedule or other disclosure in writing from
Sellers or Shareholder shall be true and correct when made, and shall be true
and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date.
7.2 Covenants of Sellers and Shareholder. All of the covenants
and agreements herein on the part of Sellers and Shareholder to be complied
with or performed on or before the Closing Date shall have been fully complied
with and performed.
7.3 Seller's Certificates. There shall be delivered to Buyers a
certificate dated as of the Closing Date and signed by the President or a Vice
President of each Seller and by Shareholder to the effect set forth in Sections
7.1 and 7.2, which certificate shall have the effect of a representation and
warranty made by each Seller and by Shareholder on and as of the Closing Date.
7.4 Noncompetition Agreements. (a) Each Seller shall have
executed and delivered to Buyers the Seller Noncompetition Agreement in
substantially the form attached hereto as
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Exhibit C-1, and (b) Robert A. Cook shall have executed and delivered to Buyers
the Shareholder Noncompetition Agreement in substantially the form attached
hereto as Exhibit C-2.
7.5 Shareholder Consulting Agreement. Robert A. Cook shall have
executed and delivered to Buyers the Shareholder Consulting Agreement in
substantially the form attached hereto as Exhibit D.
7.6 CSAA Contract. Sellers and Shareholder shall have delivered
evidence reasonably satisfactory to Buyers of the June 1996 renewal of Sellers'
contract with CSAA (the "CSAA Contract") for a term of not less than one (1)
year from the date of such renewal.
7.7 No Casualty Losses. The Assets shall not have suffered any
destruction or damage by fire, explosion or other casualty or any taking by
eminent domain which has materially impaired the operation of the Assets or
otherwise had a material adverse effect upon the business conducted by Sellers.
7.8 Certificates of Authorities. Each Seller shall have
furnished to Buyers (i) certificates of the Secretary of State of California
and the California Franchise Tax Board, each dated as of a date not more than
fifteen (15) days prior to the Closing Date, attesting to the organization,
existence and good standing of such Seller, (ii) a copy, certified by the
Secretary of State of California as of a date not more than fifteen (15) days
prior to the Closing Date, of such Seller's Articles of Incorporation and all
amendments thereto, (iii) a copy, certified by the Secretary of such Seller, of
the Bylaws of such Seller, as amended and in effect at the Closing Date and
(iv) a copy, certified by an authorized officer of Seller, of resolutions duly
adopted by the Board of Directors of Seller duly authorizing the transactions
contemplated in this Agreement.
7.9 Litigation. At the Closing Date, there shall not be pending
or threatened any litigation in any court or any proceeding before any Agency,
(i) in which it is sought to restrain, invalidate, set aside or obtain damages
in respect of the consummation of the purchase and sale of the Assets or the
other transactions contemplated hereby, (ii) that could, if adversely
determined, result in any material adverse change in the business, operations
or assets or the condition, financial or otherwise, or results of operations of
a Seller, (iii) that could, if adversely determined, have a material adverse
effect on the right or ability of a Seller to carry on its business as now
conducted or (iv) as a result of which, in the reasonable judgment of Buyers,
Buyers would be deprived of the material benefits of their ownership of the
Assets.
7.10 Satisfactory to Buyers' Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related matters shall have been satisfactory to Locke
Purnell Rain Harrell (A Professional Corporation), Dallas, Texas, counsel for
Buyers and FYI.
7.11 Opinion of Sellers' Counsel. Buyers shall have received an
opinion of Carr, McClellan, Ingersoll, Thompson & Horn Professional
Corporation, counsel for Sellers and Shareholder, dated the Closing Date, to
the effect that: (i) Each Seller is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
California; (ii) each Seller and Shareholder has full corporate power and
authority to enter into this Agreement and all other agreements by and among
the parties and to consummate the transactions contemplated hereby and thereby;
(iii) all corporate action required to be taken by Sellers to approve this
Agreement and all action required to be taken by Shareholder to approve this
Agreement and all other agreements by and among the parties and the
transactions contemplated hereby and thereby and to authorize execution and
delivery of this Agreement and all other agreements by and among the parties
and the performance by Sellers and Shareholder of their respective obligations
hereunder and thereunder, have been duly and properly taken, and no further
action or approval is required in order to permit Sellers and Shareholder to
consummate the transactions contemplated by this Agreement and all other
agreements by and among the parties; and (iv) this Agreement, the instruments
of transfer of the Assets from Sellers to Buyers and all other agreements by
and among the parties have been duly executed and delivered by Sellers and by
Shareholder and are legal, valid and binding obligations of Sellers and of
Shareholder enforceable in accordance with their terms.
7.12 No Material Adverse Changes. There shall not have occurred
(i) any material adverse change in the Business or the Assets or (ii) any
material loss or damage to any of the Assets (whether or not covered by
insurance) of Sellers. Buyers shall receive a certificate from Sellers, dated
as of the Closing Date and in form and substance reasonably satisfactory to
Buyer, as to the fulfillment of the conditions set forth in this Section 7.11.
7.13 Consents and New Contractor Agreements. Each Seller shall
have obtained all orders, approvals or consents of third parties, including,
without limitation, any consents or approvals deemed necessary by counsel to
Buyers that shall be required to consummate the transactions contemplated
hereby, including, without limitation, consents to the assignment of the
Assumed Liabilities listed on Schedule 1.1B; provided, however, that Seller
shall not be required to deliver the consent to the assignment by Seller to
Buyers of the CSAA Contract. Each Buyer and FYI acknowledges that (i) the
failure to obtain the consent of CSAA to the consummation of the transactions
set forth in this Agreement shall not affect Buyers' obligations under this
Agreement or give rise to any claim by FYI or Buyers under this Agreement or
otherwise and (ii) it shall not contact CSAA with respect to such transactions
prior to the Closing. Sellers shall have obtained written agreements of each
of the contractors set forth on Schedule 3.7 hereto to perform for Buyers the
services previously performed thereby for Sellers and to enter into equipment
leases with Buyers on substantially the same terms and conditions as existed
immediately prior to the Closing Date.
7.14 Approval of Boards of Directors. The Board of Directors of
each Buyer and of FYI shall have approved and ratified the execution by such
Buyer or FYI, as the case may be, of this Agreement and the other agreements to
be executed and delivered by such party in connection with the consummation of
the transactions contemplated hereby.
7.15 Further Assurances. Each Seller and Shareholder shall take
all such further action as may be reasonably requested by Buyers in order to
effectuate the consummation of the
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transactions contemplated by this Agreement. If Buyers shall reasonably
determine that any further conveyance, assignment or other document or any
further action is necessary to vest in them full title to the Assets, Sellers
and Shareholder shall cause the appropriate officers to execute and deliver all
such instruments and take all such action as Buyers may reasonably determine to
be necessary. Sellers shall have provided Buyers with all necessary
cooperation to assist Buyers in obtaining the certificates and permits to be
required of Buyer to operate the Business following the Closing.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLERS AND SHAREHOLDER
The obligations of Sellers and Shareholder to cause the sale of the
Assets and the other transactions contemplated hereby to occur at Closing shall
be subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, except such conditions as Sellers and Shareholder may
waive in writing:
8.1 Representations and Warranties of Buyers. All of the
representations and warranties of Buyers and FYI contained in this Agreement
and in any Schedule or other disclosure in writing from Buyer shall be true and
correct when made, and shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
8.2 Covenants of Buyers. All of the covenants and agreements
herein on the part of Buyers to be complied with or performed on or before the
Closing Date shall have been fully complied with and performed.
8.3 Buyers' Certificate. There shall be delivered to Sellers
and Shareholder a certificate dated as of the Closing Date and signed by the
President or a Vice President of each Buyer and of FYI to the effect set forth
in Sections 8.1 and 8.2, which certificate shall have the effect of a
representation and warranty made by Buyers and FYI on and as of the Closing
Date.
8.4 Noncompetition Agreements. Buyers shall have executed and
delivered to Sellers and to Robert A. Cook the Noncompetition Agreements.
8.5 Shareholder Consulting Agreement. Buyers shall have
executed and delivered to Robert A. Cook the Shareholder Consulting Agreement.
8.6 Employment Agreement for MaryDell K. Rose. Buyers shall
have executed and delivered to MaryDell K. Rose the Employment Agreement in
substantially the form attached hereto as Exhibit E.
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8.7 Certificates of Authorities. Each Buyer shall have
furnished to Sellers (i) a certificate of the Secretary of State of Delaware,
dated as of a date not more than fifteen (15) days prior to the Closing Date,
attesting to the organization, existence and good standing of such Buyer, (ii)
a copy, certified by the Secretary of State of Delaware as of a date not more
than fifteen (15) days prior the Closing Date, of such Buyer's Certificate of
Incorporation and all amendments thereto, (iii) a copy, certified by the
Secretary of such Buyer, of the Bylaws of such Buyer, as amended and in effect
at the Closing Date and (iv) a copy, certified by an authorized officer of such
Buyer, of resolutions duly adopted by the Board of Directors of such Buyer duly
authorizing the transactions contemplated in this Agreement.
8.8 Satisfactory to Sellers' Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related legal matters shall have been satisfactory to
Carr, McClellan, Ingersoll, Thompson & Horn Professional Corporation, counsel
for Sellers and Shareholder.
8.9 Opinion of Buyers' Counsel. Sellers and Shareholder shall
have received an opinion of Locke Purnell Rain Harrell (A Professional
Corporation), counsel for Buyers and FYI, dated the Closing Date, to the effect
that: (i) Each Buyer and FYI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and each Buyer is
qualified to carry on its business in the State of California; (ii) each Buyer
and FYI has full corporate power and authority to enter into this Agreement and
all other agreements by and among the parties and to consummate the
transactions contemplated hereby and thereby; and (iii) this Agreement and all
other agreements by and among the parties have been duly executed by Buyers and
FYI (to the extent a party thereto) and are legal, valid and binding
obligations of Buyers and FYI enforceable in accordance with their terms.
ARTICLE IX
DATE AND PLACE OF CLOSING
9.1 Date and Place of Closing. Subject to satisfaction or
waiver of the conditions to the obligations of the parties, the purchase and
sale of the Assets pursuant to this Agreement shall be consummated at a closing
(the "Closing") to be held in the offices of Locke Purnell Rain Harrell (A
Professional Corporation), in Dallas, Texas, or such other place or in such
other manner as mutually agreed to by the parties, at 10:00 a.m., Dallas, Texas
time, on June 26, 1996, or such other date as the parties may mutually agree
upon (the "Closing Date").
ARTICLE X
CLOSING
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10.1 Performance by Sellers and Shareholder. At the Closing,
concurrently with performance by Buyers of its obligations to be performed at
the Closing:
(a) Conveyances. Each Seller shall execute and deliver
to the applicable Buyer, in form and substance acceptable to such Buyer (i)
Bills of Sale and Assignment in substantially the forms attached hereto as
Exhibits A-1 and A-2 conveying to such Buyer all items of personalty included
among the Assets, (ii) except as provided in Section 7.13 hereof, assignments
of each of the contracts, leases, arrangements and commitments listed on
Schedule 1.1B and (iii) all other assignments, endorsements and instruments of
transfer as shall be necessary or appropriate to carry out the intent of this
Agreement and as shall be sufficient to vest in Buyers title to all of the
Assets and all right, title and interest of such Seller thereto. If requested
by Buyers, such documents shall be in a form suitable for recording.
(b) Records. Each Seller shall deliver to Buyers all
documents, agreements, reports, books, records and accounts pertaining
specifically to the Assets that are in such Seller's possession.
(c) Certificate. Each Seller shall execute and deliver
the certificate referred to in Section 7.3.
(d) Noncompetition Agreements and Shareholder Consulting
Agreement. Sellers and Robert A. Cook shall execute and deliver to Buyers the
Noncompetition Agreements referred to in Section 7.4, and Robert A. Cook shall
execute and deliver to Buyers the Shareholder Consulting Agreement referred to
in Section 7.5.
(e) Certificates of Authorities. Each Seller shall
deliver to Buyers the certificates of authorities with respect thereto referred
to in Section 7.8.
(f) Opinion of Sellers' Counsel. Sellers shall deliver
to Buyers the opinion of its counsel, dated the Closing Date, as to the matters
specified in Section 7.11.
(g) Consents. Sellers shall deliver to Buyers the
consents and approvals required by Section 7.13.
(h) Other Actions. Each Seller and Shareholder shall
take all such other steps as may be necessary or appropriate to put Buyers in
actual and complete ownership and possession of the Assets.
10.2 Buyer's Performance. At the Closing, concurrently with the
performance by Sellers and Shareholder of their respective obligations to be
performed at the Closing, each Buyer shall:
(a) Purchase Price. Deliver to Sellers that portion of
the Purchase Price specified in the first sentence of Section 2.3.
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(b) Assumption Agreements. Execute and deliver to the
applicable Seller Assumption Agreements in substantially the form attached
hereto as Exhibit B-1 or B-2.
(c) Certificate. Execute and deliver to Sellers the
certificate referred to in Section 8.3.
(d) Noncompetition Agreements and Shareholder Consulting
Agreement. Execute and deliver to Sellers and Robert A. Cook the
Noncompetition Agreements referred to in Section 8.4 and execute and deliver to
Robert A. Cook the Shareholder Consulting Agreement referred to in Section
8.5.
(e) Employment Agreement. Execute and deliver to
MaryDell K. Rose the Employment Agreement.
(f) Certificates of Authorities. Deliver to Sellers the
certificates of authorities referred to in Section 8.7.
(g) Opinion of Counsel to Buyers and FYI. Deliver to
Sellers and Shareholder the opinion of their counsel, dated the Closing Date,
as to the matters specified in Section 8.9.
(h) Hiring of Employees. Deliver to Sellers evidence
reasonably satisfactory thereto of delivery to Sellers' employees (other than
MaryDell K. Rose) immediately prior to the Closing Date of offers of employment
on an at-will basis on substantially the same terms and conditions of
employment as existed therefor immediately prior to the Closing Date.
10.3 Prorations; Other Instruments. In addition to the
foregoing, Buyers, Sellers and Shareholder agree as follows:
(a) Taxes and Utilities; Change of Tax Method. Real
estate and personal property taxes for the current year and utility charges for
the billing periods including the Closing Date shall be apportioned pro rata
among Buyers and Sellers as of the Effective Date. If the amount of real
estate and personal property taxes for the current year and the amount of
utility charges for the billing periods including the Effective Date are not
ascertainable on the Closing Date, such taxes and utility charges shall be
apportioned based on the immediately preceding tax year and billing periods;
provided, however, that such taxes and utility charges shall be reapportioned
based on actual taxes and charges promptly after such amounts are ascertained.
(b) Further Action by Sellers and Shareholder. At any
time and from time to time, at or after the Closing, upon request of Buyers,
each Seller and Shareholder shall do, execute, acknowledge and deliver or shall
cause to be done, executed, acknowledged and delivered all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances
as may reasonably be required in order to evidence, vest in and confirm to
Buyers full and complete title to, possession of, and the right to use and
enjoy, the Assets.
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<PAGE> 25
(c) Further Action by Buyers. At any time and from time
to time, at or after the Closing, upon request of Sellers or Shareholder,
Buyers shall do, execute, acknowledge and deliver or shall cause to be done,
executed, acknowledged and delivered all such further acts and assurances as
may reasonably be required in order to better assure and confirm to Sellers and
Shareholder the assumption by Buyers of the obligations to render performance
that are to be assumed by Buyers pursuant to this Agreement.
10.4 Stock Options. Promptly after the Closing Date, Buyers
shall cause FYI to grant to such employees of Buyers as selected by Shareholder
and Greg Melanson and FYI nonqualified stock options to acquire an aggregate of
twenty thousand (20,000) shares of Common Stock in accordance with the terms of
the FYI 1995 Stock Option Plan (the "Stock Option Plan"). Such stock options
shall be in minimum lots of at least one thousand (1,000) shares each and shall
have a per share exercise price equal to the Fair Market Value (as defined in
the Stock Option Plan) per share on the Closing Date and vest and become
exercisable in twenty percent (20%) increments on July 22, 1996 and on each of
the first through fourth anniversaries of the date of grant in accordance with
the procedural terms set forth in the Stock Option Plan.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1 Survival. All representations, warranties, covenants and
agreements made in this Agreement shall survive and shall not be extinguished
by the Closing or any investigation made by or on behalf of any party hereto.
11.2 Buyers' Losses. Each Seller and Shareholder, jointly and
severally, agrees to indemnify Buyers and save and hold Buyers harmless from,
against, for and in respect of any and all damages (including, without
limitation, amounts paid in settlement with Sellers' consent), losses,
obligations, liabilities, liens, deficiencies, costs and expenses, including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any suit, action, investigation, claim or proceeding (hereinafter
referred to collectively as "Buyers' Losses") suffered, sustained, incurred or
required to be paid by Buyers by reason of (i) the failure by Sellers to comply
with all applicable laws relating to bulk transfers including the provisions of
the Uniform Commercial Codes of the State of California; (ii) any
representation or warranty made by a Seller and Shareholder in or pursuant to
this Agreement being untrue or incorrect in any respect; (iii) any failure by a
Seller or Shareholder to observe or perform its covenants and agreements set
forth in this Agreement; (iv) any liability for warranties or defective
products arising from sales of goods manufactured or sold or services provided
by a Seller prior to the Closing Date; (v) any failure by a Seller or
Shareholder to satisfy and discharge any other liability or obligation not
expressly assumed by Buyers pursuant to this Agreement; or (vi) the items
disclosed on Schedule 3.9 hereto.
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<PAGE> 26
11.3 Environmental Indemnity.
(a) Each Seller and Shareholder agrees to indemnify and
hold harmless Buyers 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 any Seller or Shareholder at or
on any property now or formerly owned, operated or leased by Sellers during the
time of any Sellers' 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 during the time of Sellers'
operation or lease thereof; (ii) the failure of Sellers 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 either Seller during the time of Seller'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 11.3 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 Buyers 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, 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.
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11.4 Employee Compensation and Benefits. Each Seller and
Shareholder agrees to indemnify and hold Buyers harmless from and against any
and all claims made by employees of Sellers, 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 a Seller prior to the Closing Date or injury or
sickness occurring prior to the Closing Date (collectively, "Employee Claims").
11.5 Sellers' Losses. Each Buyer and FYI, jointly and severally,
agree to indemnify Sellers and Shareholder and save and hold Sellers and
Shareholder harmless from, against, for and in respect of any and all damages
(including, without limitation, amounts paid in settlement with Buyers'
consent), losses, obligations, liabilities, claims, deficiencies, costs and
expenses, including, without limitation, reasonable attorneys' fees and other
costs and expenses incident to any suit, action, investigation, claim or
proceeding (hereinafter referred to collectively as "Sellers' Losses")
suffered, sustained, incurred or required to be paid by Sellers or Shareholder
by reason of (i) any representation or warranty made by a Buyer in or pursuant
to this Agreement being untrue or incorrect in any respect; (ii) any failure by
a Buyer or FYI to observe or perform its covenants and agreements set forth in
this Agreement; (iii) any liability for warranties or defective products
arising from sales of goods manufactured or sold or services provided by a
Buyer on or after the Closing Date; (iv) any failure by a Buyer to satisfy and
discharge any liability or obligation expressly assumed by a Buyer pursuant to
this Agreement; or (v) any and all claims made by employees of Sellers for
workmen's compensation, medical insurance, disability, vacation, severance,
sick benefits or other compensation arrangements to the extent the same are
based on employment service rendered to Buyers on or after the Closing Date.
11.6 Notice of Loss. Notwithstanding anything herein contained,
Buyers and Sellers and Shareholder shall 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 which is asserted
has been given to the Indemnifying Party (hereafter defined) and, in addition,
if such matter arises out of a suit, action, investigation or proceeding, such
notice is given promptly after the Indemnified Party (hereafter defined) shall
have been given notice of the commencement of a suit, action, investigation or
proceeding. With respect to Buyers' Losses, Environmental Costs and Employee
Claims, each Seller and Shareholder, jointly and severally, shall be the
Indemnifying Party and Buyers shall be the Indemnified Party. With respect to
Sellers' Losses, each Buyer, jointly and severally, shall be the Indemnifying
Party and Sellers and Shareholder shall be the Indemnified Party.
11.7 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
promptly to defend, contest or otherwise protect against such suit, action,
investigation, claim or proceeding at its own cost and expense. The
Indemnified Party shall have the right, but not the obligation, to participate
at its own expense in a 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
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<PAGE> 28
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, 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 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.
However, if the Indemnifying Party undertakes the defense of such matters, the
Indemnified Party shall not 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.
11.8 Satisfaction of Claims. Buyers shall have the option of
recovering amounts owing thereto pursuant to Sections 11.2, 11.3 and 11.4 for
Buyers' Losses, Environmental Costs and Employee Claims from Sellers or, to the
extent available, from the funds held thereby as described in the second
sentence of Section 2.3.
ARTICLE XII
MISCELLANEOUS
12.1 Guarantee. FYI hereby unconditionally guarantees the
performance of Buyers' obligations under this Agreement in accordance with, and
subject to, the terms hereof. FYI hereby authorizes Sellers and Shareholder to
(i) change the terms of all or any part of the obligations guaranteed hereby,
including without limitation, releasing, extending or compromising the same, or
changing the time for payment thereof; (ii) take, or decline to take,
collateral for the payment of the obligations guaranteed hereby, and exchange,
enforce or fail to enforce, fail to attach or perfect, or release its interests
in any such collateral; and (iii) release or substitute, or impair or suspend,
any remedy against, or fail to proceed against, Buyers or any guarantor of, or
anyone else liable on the obligations guaranteed hereby.
12.2 Expenses. Except as otherwise expressly provided herein,
Sellers, Shareholder and Buyers shall each pay their own expenses in connection
with the preparation of this Agreement, and the consummation of the
transactions contemplated hereby, including, without limitation, fees of their
own counsel, auditors and other experts, whether or not such transactions be
consummated.
12.3 Entire Agreement. This Agreement (including the exhibits
and schedules hereto) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties
hereto with respect to the subject matter hereof, and no party shall be liable
or bound to the other in any manner by any representations or warranties not
set forth herein.
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12.4 Confidentiality; Publicity. Each Seller and Shareholder and
each Buyer covenants that it (a) will hold and shall take all steps reasonably
necessary to ensure that its representatives hold, in strict confidence all
information (other than such written information as may be or become publicly
available) furnished by the other parties to this Agreement or its
representatives to it in connection with this Agreement (the "Information");
and (b) will not, without the prior written consent of such other parties,
release or disclose any Information to any other person, except to its
representatives who in its reasonable judgment need to know and have access to
the Information in connection with the consummation of the transactions
contemplated by this Agreement and who are informed by it of the confidential
nature of the Information; provided, however, that this Section 12.4 shall not
(i) prohibit disclosures as may be required by law and (ii) apply after the
Closing Date to any Information with respect to the Assets. Except as
otherwise required by law, no party hereto shall issue any press release or
make any public statement, in either case relating to or in connection with or
arising out of this Agreement or the matters contained herein without obtaining
the prior written approval of the other parties to the content and manner of
presentation and publication thereof. Each party to this Agreement covenants
to the other parties that it shall not unreasonably withhold or delay such
consent.
12.5 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Agreement,
express or implied, is intended to confer upon any party, other than the
parties and their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of such agreements.
12.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
12.7 Headings. The headings of the paragraphs and subparagraphs
of this Agreement are inserted for convenience of reference only and shall not
be deemed to constitute part of this Agreement or to affect the construction
hereof.
12.8 Use of Certain Terms. As used in this Agreement, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision.
12.9 Modification and Waiver. Any of the terms or conditions of
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof, and this Agreement may be modified or amended
by a written instrument executed by Buyers and Sellers and Shareholder. No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by all of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
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<PAGE> 30
12.10 Notices. Any notice, request, instruction, document or
other communication to be given hereunder by any party hereto to any other
party hereto shall be in writing and validly given if (i) delivered personally,
(ii) sent by telecopy with electronic confirmation of receipt, (iii) delivered
by overnight express, or (iv) sent by registered or certified mail, postage
prepaid, as follows:
(i) If to Sellers Robert A. Cook and Staff, Inc.
and/or to RAC Services, Inc.
Shareholder: 2025 Gateway Place
Suite 330
San Jose, California 95110
Attention: Mr. Robert A. Cook
(ii) If to Buyers: Robert A. Cook Acquisition Corp.
RAC (California) Acquisition Corp.
3232 McKinney Avenue
Suite 900
Dallas, Texas 75204
Attention: Margot T. Lebenberg, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally, or sent by telecopy or overnight express
in the manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon actual receipt by such party. Any notice
that is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been given to the party to whom it is addressed
at the close of business, local time of the recipient, on the fourth day after
the day it is so placed in the mail.
12.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED,
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO
ITS CHOICE OF LAW PRINCIPLES).
12.12 Brokerage, Financial Advisor or Finder Fees. No agent,
advisor, broker, person or firm acting on behalf of either Buyers, Sellers or
Shareholder is, or will be, entitled to any commission or broker's, advisor's
or finder's fees from each of the parties hereto, or from any of their
respective affiliates, in connection with any of the transactions contemplated
hereby.
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<PAGE> 31
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in counterparts all as of the date first above written.
SELLERS:
ROBERT A. COOK AND STAFF, INC.
By: /s/ Robert A. Cook
---------------------------------------
Robert A. Cook, President
RAC SERVICES, INC.
By: /s/ Robert A. Cook
---------------------------------------
Robert A. Cook, President
SHAREHOLDER:
/s/ Robert A. Cook
------------------------------------------------
Robert A. Cook
/s/ Robert A. Cook
------------------------------------------------
Robert A. Cook, as Trustee of the Cook 1993
Living Trust
/s/ Anna M. Cook
------------------------------------------------
Anna M. Cook, as Trustee of the Cook 1993 Living
Trust
<PAGE> 32
BUYERS:
ROBERT A. COOK ACQUISITION CORP.
By: /s/ Thomas C. Walker
--------------------------------------------
Printed Name: Thomas C. Walker
Title: President and Chief Executive Officer
RAC (CALIFORNIA) ACQUISITION CORP.
By: /s/ Thomas C. Walker
--------------------------------------------
Printed Name: Thomas C. Walker
Title: President and Chief Executive Officer
Solely for the purposes of Article IV and VI,
Section 8.3, Section 11.5 and Section 12.1
hereof
FYI:
FYI INCORPORATED
By: /s/ Thomas C. Walker
--------------------------------------------
Printed Name: Thomas C. Walker
Title: Chairman of the Board and Chief
Development Officer
<PAGE> 33
ASSET PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
- ---------
1.1A Real Property Interests
1.1B Assumed Contracts
1.1C Excluded Assets
2.2 Allocation of Purchase Price
3.2A Good Title to Assets; Encumbrances
3.5 Trademarks, Etc.
3.6 Licenses, Franchises, Permits and Governmental
Authorizations
3.7 Contracts
3.9 Litigation
3.11 Financial Statements
3.12 Employee Benefits
3.13 Employees
3.15 Required Consents
3.16 Insurance
3.18 Business Relations
3.23 Receivables
5.2 Bonuses Payable by Sellers
EXHIBITS
- --------
A-1 Bill of Sale and Assignment (Robert A. Cook and Staff, Inc.)
A-2 Bill of Sale and Assignment (RAC Services, Inc.)
B-1 Assumption Agreement (Robert A. Cook and Staff, Inc.)
B-2 Assumption Agreement (RAC Services, Inc.)
C-1 Seller Noncompetition Agreement
C-2 Shareholder Noncompetition Agreement
D Shareholder Consulting Agreement
E Employment Agreement
<PAGE> 34
SCHEDULE 2.2
ALLOCATION OF PURCHASE PRICE
ROBERT A. COOK AND STAFF, INC.
<TABLE>
<S> <C> <C>
(a) Accounts Receivable $ 1,886,634.28
(b) Furniture and Equipment and Vehicle(s) $ 384,954.00
(c) Prepaids/Other $ 31,980.80
(d) Goodwill $ 9,096,430.92
</TABLE>
RAC SERVICES, INC.
<TABLE>
<S <C> <C>
(a Accounts Receivable $
(b Furniture and Equipment and Vehicle(s $
(c Prepaids/Other $
(d Goodwill $ 1.00
</TABLE>
<PAGE> 1
EXHIBIT 10.20
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is entered
into to be effective as of June 26, 1996, by and among F.Y.I. Incorporated, a
Delaware corporation ("F.Y.I."), Imagent Acquisition Corp., a Delaware
corporation ("Imagent"), Researchers Acquisition Corp., a Delaware corporation
("Researchers"), Recordex Acquisition Corp., a Delaware corporation
("Recordex"), DPAS Acquisition Corp., a Delaware corporation ("DPAS"), Leonard
Archives Acquisition Corp., a Delaware corporation ("Leonard"), Deliverex
Acquisition Corp., a Delaware corporation ("Deliverex"), Permanent Records
Acquisition Corp., a Delaware corporation ("Permanent"), Deliverex Sacramento
Acquisition Corp., a Delaware corporation ("Sacramento") (F.Y.I., Imagent,
Researchers, Recordex, DPAS, Leonard, Deliverex, Permanent and Sacramento are
collectively referred to as the "Original Borrowers"), B&B
(Baltimore-Washington) Acquisition Corp., a Delaware corporation ("B&B"),
Premier Acquisition Corp., a Delaware corporation ("Premier"), Robert A. Cook
Acquisition Corp., a Delaware corporation ("Cook"), Peninsula Record
Management, Inc., a California corporation ("Peninsula"), and RAC (California)
Acquisition Corp., a Delaware corporation ("RAC") (B&B, Premier, Cook,
Peninsula and RAC are referred to collectively as the "New Borrowers") (the
Original Borrowers and the New Borrowers are referred to collectively as the
"Borrowers"), Banque Paribas, a bank organized under the laws of the Republic
of France, as Agent (the "Agent"), and the Lenders (as such term is defined in
the Credit Agreement, as hereinafter defined) which are parties hereto.
RECITALS
A. The Original Borrowers, the Agent and the Lenders entered into
that certain Credit Agreement dated as of April 18, 1996 (the "Credit
Agreement"), pursuant to which, among other things, the Lenders agreed to make
certain loans available to the Original Borrowers upon the terms and conditions
set forth therein;
B. Each of the New Borrowers has entered into a Borrower Addition
Agreement pursuant to which it has become a Borrower under the Credit
Agreement.
C. The Borrowers, the Agent and the Lenders desire to amend the
Credit Agreement in certain respects as more fully set out herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers, the Lenders, and the Agent hereby agree as
follows:
FIRST AMENDMENT TO CREDIT AGREEMENT Page 1
<PAGE> 2
1. Terms. All terms used herein which begin with an initial
capital letter shall, unless otherwise expressly defined herein, have the same
definitions assigned to such terms in the Credit Agreement, as modified by this
Amendment.
2. Addition of Definition of "B&B Letter of Credit." Effective
as of the date hereof, a new definition of "B&B Letter of Credit" is hereby
added to Section 1.1 of the Credit Agreement to read in its entirety as
follows:
"B&B Letter of Credit" means a Letter of Credit issued by the
Issuing Bank in favor of the Fifth Third Bank, as trustee, or any
successor thereto (the "Trustee") for the benefit of the holders of
those certain $2,400,000 Prince George's County, Maryland Variable
Rate Demand/Fixed Rate Revenue Bonds (B&B Records Center, Inc.
Facility) 1989 Issue as a replacement for the letter of credit issued
by Crestar Bank in favor of the Trustee, in a face amount not to
exceed $2,500,000, and issued under the Term Loans Commitments, as
such Letter of Credit may be renewed, extended or replaced.
3. Amendment to Definition of "Aggregate Commitment Percentage."
Effective as of the date hereof, the definition of "Aggregate Commitment
Percentage" contained in Section 1.1 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
"Aggregate Commitment Percentage" means, as to any Lender, the
percentage equivalent of a fraction, the numerator of which is the sum
of the outstanding Revolving Credit Loans Commitment of such Lender
(or, if such Commitment has terminated or expired, the outstanding
principal amount of its Revolving Credit Loans and its Letter of
Credit Liabilities relating to Letters of Credit issued pursuant to
the Revolving Credit Loans Commitments), plus the Term Loans
Commitment of such Lender (or if such Commitment has terminated or
expired, the outstanding principal amount of the Term Loans of such
Lender and its Letter of Credit Liabilities relating to Letters of
Credit issued pursuant to the Term Loans Commitments ), and the
denominator of which is the sum of the outstanding Revolving Credit
Loans Commitments of all Lenders (or, if such Commitments have
terminated or expired, the outstanding principal amount of the
Revolving Credit Loans and the Letter of Credit Liabilities relating
to Letters of Credit issued pursuant to the Revolving Credit Loans
Commitments), plus the outstanding Term Loans Commitments of all
Lenders (or if such Commitments have terminated or expired, the
outstanding principal amount of the Term Loans of all Lenders and the
Letter of Credit Liabilities relating to Letters of Credit issued
pursuant to the Term Loans Commitments).
4. Amendment to Definition of "Letter of Credit Liabilities."
Effective as of the date hereof, the definition of "Letter of Credit
Liabilities" contained in Section 1.1 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
"Letter of Credit Liabilities" means, at any time, the
aggregate undrawn face amounts of all outstanding Letters of Credit
and all unreimbursed drawings under Letters
FIRST AMENDMENT TO CREDIT AGREEMENT Page 2
<PAGE> 3
of Credit issued pursuant to the Revolving Credit Loans Commitments
and the Term Loans Commitments.
5. Amendment to Definition of "Outstanding Credit." Effective as
of the date hereof, the definition of "Outstanding Credit" contained in Section
1.1 of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Outstanding Credit" means, at any particular time, the sum of
(a) the outstanding principal amount of the Revolving Credit Loans,
plus (b) the outstanding principal amount of the Swing Loans, plus (c)
the Letter of Credit Liabilities relating to Letters of Credit issued
pursuant to the Revolving Credit Loans Commitments.
6. Amendment to Definition of "Required Lenders". Effective as
of the date hereof, the definition of "Required Lenders" contained in Section
1.1 of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Required Lenders" means, at any date of determination,
Lenders having in the aggregate at least 66 2/3% (in Dollar amount as
to any one or more of the following) of the sum of the aggregate
outstanding Revolving Credit Loans Commitments (or, if such
Commitments have terminated or expired, the aggregate outstanding
principal amount of the Revolving Credit Loans and the aggregate
Letter of Credit Liabilities relating to Letters of Credit issued
pursuant to the Revolving Credit Loans Commitments), plus the
aggregate outstanding Term Loans Commitments (or if such Commitments
have terminated or expired, the aggregate outstanding principal amount
of the Term Loans and the aggregate Letter of Credit Liabilities
relating to Letters of Credit issued pursuant to the Term Loans
Commitments).
7. Amendment to Definition of "Term Loans Commitment". Effective
as of the date hereof, the definition of "Term Loans Commitment" contained in
Section 1.1 of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
"Term Loans Commitment" means, as to any Lender, the
obligation of such Lender to make or continue Term Loans hereunder or
participate in Letter of Credit Liabilities in an aggregate principal
amount up to but not exceeding the amount set forth opposite the name
of such Lender on the signature pages hereto under the heading "Term
Loans Commitment", as the same may be reduced or terminated pursuant
to Section 2.13 or 11.2, and "Term Loans Commitments" means such
obligations of all Lenders. As of the Closing Date, the aggregate
principal amount of the Term Loans Commitments is $30,000,000.
8. Amendment to Section 1.4 of the Credit Agreement. Effective
as of the date hereof, clause (ii) of Section 1.4 of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
FIRST AMENDMENT TO CREDIT AGREEMENT Page 3
<PAGE> 4
(ii) Capital Expenditures, taxes and EBITDA as components
used in calculating the financial covenants contained in Article 10
shall, for the fiscal quarters of F.Y.I. and its Subsidiaries
commencing after and completed subsequent to the Closing Date and
ending prior to March 31, 1997, be calculated on a combined pro forma
basis based on the actual historic Capital Expenditures, taxes and
EBITDA of F.Y.I. and its Subsidiaries as individual corporations prior
to their consolidation and thereafter shall be calculated based on
the four fiscal quarters of F.Y.I. and its Subsidiaries then most
recently ended, and
9. Amendment to Section 2.3(c) of the Credit Agreement.
Effective as of the date hereof, Section 2.3(c) of the Credit Agreement is
hereby amended by adding two new sentences at the end of such Section 2.3(c) to
read in their entirety as follows:
For purposes of this Section 2.3(c), the face amount of any
Letters of Credit issued pursuant to the Term Loans Commitments shall
be added to the outstanding principal balance of the Term Loans for
purposes of determining if such aggregate amount is at or below the
level to which the balance of the Term Loans is required to be reduced
by this Section 2.3(c). If at any time prior to the Term Loans
Maturity Date when any Letters of Credit are outstanding under the
Term Loans Commitments, the outstanding principal balance of the Term
Loans is required by the terms of this Section 2.3(c) to be reduced to
a level which is below the face amount of such outstanding Letters of
Credit, then following the repayment of all outstanding Term Loans the
Term Loans Borrowers shall deliver to the Agent cash or cash
equivalents in an amount equal to or greater than the difference
between the face amount of such outstanding Letters of Credit and the
level to which the Term Loans Borrowers are required to repay the
outstanding balance of the Term Loans, such cash or cash equivalents
to be pledged to the Agent as security for the Obligations pursuant to
documentation satisfactory to the Agent in form and substance.
10. Amendment to Section 2.7(e) of the Credit Agreement.
Effective as of the date hereof, Section 2.7(e) of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
(e) Borrowing Base. If at any time the Outstanding
Credit exceeds an amount equal to the lesser of (i) the Aggregate
Borrowing Base or (ii) the Revolving Credit Loans Commitments at such
time, within one Business Day after the occurrence thereof each of the
Revolving Loans Borrowers shall jointly and severally pay to the Agent
the amount of such excess as a prepayment of the Revolving Credit
Loans (or, if the Revolving Credit Loans have been paid in full, to
reduce or to provide cash collateral to secure the outstanding Letter
of Credit Liabilities relating to Letters of Credit issued pursuant to
the Revolving Credit Loans Commitments). If at any time the
Outstanding Credit for which any Revolving Loans Borrower is the
borrower and the account party exceeds such Borrower's Borrowing Base,
such Borrower, within one Business Day of the occurrence thereof,
shall pay to the Agent the amount of such excess as a prepayment of
the Revolving Credit Loans (or if the Revolving Credit Loans have
been paid in full, to
FIRST AMENDMENT TO CREDIT AGREEMENT Page 4
<PAGE> 5
reduce or to provide cash collateral to reduce the outstanding Letter
of Credit Liabilities of such Borrower relating to Letters of Credit
issued pursuant to the Revolving Credit Loans Commitments).
11. Amendment to Section 2.14(a) of the Credit Agreement.
Effective as of the date hereof, Section 2.14(a) of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
(a) Subject to the terms and provisions of this Agreement,
each of the Revolving Loans Borrowers may utilize the Revolving Credit
Loans Commitments by requesting that the Issuing Bank issue Letters of
Credit; provided, that the aggregate amount of outstanding Letter of
Credit Liabilities under the Revolving Credit Loans Commitments shall
not at any time exceed $1,000,000. Subject to the terms and
provisions of this Agreement, each of the Term Loans Borrowers may
utilize the Term Loans Commitments by requesting that the Issuing Bank
issue the B&B Letter of Credit; provided, that the aggregate amount of
outstanding Letter of Credit Liabilities under the Term Loans
Commitments shall not at any time exceed $2,500,000. Upon the date of
issue of each Letter of Credit, the Issuing Bank shall be deemed,
without further action by any party hereto, to have sold to each
Lender, and each Lender shall be deemed, without further action by any
party hereto, to have purchased from the Issuing Bank, a participation
to the extent of such Lender's Commitment Percentage in such Letter of
Credit.
12. Amendment to Section 2.14(b) of the Credit Agreement.
Effective as of the date hereof, Section 2.14(b) of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
(b) F.Y.I., with respect to the Revolving Credit Loans or
the Term Loans, as applicable, for and on behalf of itself and the
other Revolving Loans Borrowers or Term Loans Borrowers, as
applicable, shall give the Issuing Bank (with a copy to the Agent) at
least five Business Days irrevocable prior notice (effective upon
receipt) specifying the date of each Letter of Credit and the nature
of the transactions to be supported thereby. Upon receipt of such
notice the Issuing Bank shall promptly notify each applicable Lender
of the contents thereof and of such Lender's Commitment Percentage of
the amount of the proposed Letter of Credit. Each Letter of Credit
shall have an expiration date that does not exceed one year from the
date of issuance (provided, however, that the B&B Letter of Credit may
have an expiration date that is up to eighteen months after the date
of issuance) and that does not extend beyond the Revolving Credit
Loans Maturity Date, shall be payable in Dollars, shall support a
transaction entered into in the ordinary course of the account party's
or parties' business, shall be satisfactory in form and substance to
the Issuing Bank, and shall be issued pursuant to such agreements,
documents and instruments (including a Letter of Credit Agreement) as
the Issuing Bank may reasonably require, none of which shall be
inconsistent with this Section 2.14. Each Letter of Credit shall (i)
provide for the payment of drafts presented for, on or thereunder by
the beneficiary in accordance with the terms thereof, when such drafts
are accompanied by the documents
FIRST AMENDMENT TO CREDIT AGREEMENT Page 5
<PAGE> 6
(if any) described in the Letter of Credit and (ii) to the extent not
inconsistent with the terms hereof or any applicable Letter of Credit
Agreement, be subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500 (together with any subsequent revision thereof
approved by a Congress of the International Chamber of Commerce and
adhered to by the Issuing Bank, the "UCP"), and shall, as to matters
not governed by the UCP, be governed by, and construed and interpreted
in accordance with, the laws of the State of Texas.
13. Amendment to Section 2.14(c) of the Credit Agreement.
Effective as of the date hereof, Section 2.14(c) of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
(c) Each of the Revolving Loans Borrowers jointly and
severally agrees to pay to the Agent for the account of each Lender
(except as provided in the proviso below), in arrears on each
Quarterly Date beginning on June 30, 1996 and on the Revolving Credit
Loans Maturity Date, a nonrefundable letter of credit fee with respect
to each Letter of Credit issued pursuant to the Revolving Credit Loans
Commitment in an amount equal to (i) the rate per annum equal to the
Applicable Margin (for Revolving Credit Loans) for Eurodollar Loans in
effect on the date of issuance of such Letter of Credit (with respect
to the fee due on the first Quarterly Date after issuance) or on the
first day of the applicable quarterly or other period beginning after
the calendar quarter during which the issuance of such Letter of
Credit occurred (with respect to the fee due on each subsequent
Quarterly Date or on the Revolving Credit Loans Maturity Date),
multiplied by (ii) the daily average face amount of the Letters of
Credit issued pursuant to the Revolving Credit Loans Commitments and
in effect during the applicable period. Each of the Term Loans
Borrowers jointly and severally agrees to pay to the Agent for the
account of each Lender (except as provided in the proviso below), in
arrears on each Quarterly Date beginning on June 30, 1996 and on the
Term Loans Maturity Date, a nonrefundable letter of credit fee with
respect to each Letter of Credit issued pursuant to the Term Loans
Commitment in an amount equal to (i) the rate per annum equal to the
Applicable Margin (for Term Loans) for Eurodollar Loans in effect on
the date of issuance of such Letter of Credit (with respect to the fee
due on the first Quarterly Date after issuance) or on the first day of
the applicable quarterly or other period beginning after the calendar
quarter during which the issuance of such Letter of Credit occurred
(with respect to the fee due on each subsequent Quarterly Date or on
the Term Loans Maturity Date), multiplied by (ii) the daily average
face amount of the Letters of Credit issued pursuant to the Term Loans
Commitments and in effect during the applicable period. The Agent
agrees to pay to each Lender or Issuing Bank (as applicable), promptly
after receiving any payment of letter of credit fees referred to above
in this subsection (c), such Lender's Commitment Percentage of such
fees or such Issuing Bank's fees (as applicable), respectively. The
Borrowers further jointly and severally agree to pay to the Issuing
Bank for its own account, on the date of issuance of such Letter of
Credit and on each anniversary of such date of issuance (if such
Letter of Credit then remains outstanding), an amount equal to the
greater of one-quarter of one percent (0.25%) of the face amount of
the Letter of Credit being issued or $750.00. In
FIRST AMENDMENT TO CREDIT AGREEMENT Page 6
<PAGE> 7
addition to the foregoing fees, each of the Revolving Loans Borrowers
and Term Loans Borrowers, as applicable, depending upon whether the
applicable Letter of Credit was issued pursuant to the Revolving
Credit Loans Commitments or the Term Loans Commitments, shall pay or
reimburse the Issuing Bank for such normal and customary costs and
expenses, including, without limitation, administrative, issuance,
amendment, payment and negotiation charges, as are incurred or charged
by the Issuing Bank in issuing, effecting payment under, amending or
otherwise administering any Letter of Credit.
14. Amendment to Section 2.14(e) of the Credit Agreement.
Effective as of the date hereof, Section 2.14(e) of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
(e) Each of the Revolving Loans Borrowers shall be irrevocably
and unconditionally and jointly and severally obligated to immediately
reimburse the Issuing Bank for any amounts paid by the Issuing Bank
upon any drawing under any Letter of Credit issued pursuant to the
Revolving Credit Loans Commitments, without presentment, demand,
protest or other formalities of any kind. Each of the Term Loans
Borrowers shall be irrevocably and unconditionally and jointly and
severally obligated to immediately reimburse the Issuing Bank for any
amounts paid by the Issuing Bank upon any drawing under any Letter of
Credit issued pursuant to the Term Loans Commitments, without
presentment, demand, protest or other formalities of any kind. The
Issuing Bank will pay to each such Lender such Lender's Commitment
Percentage of all amounts received from or on behalf of the account
party or parties for application in payment, in whole or in part, of
the Reimbursement Obligation in respect of any Letter of Credit, but
only to the extent such Lender has made payment to the Issuing Bank in
respect of such Letter of Credit pursuant to subsection (d) above.
Outstanding Reimbursement Obligations shall bear interest at the
Default Rate and such interest shall be payable on demand.
15. Amendment to Section 2.15 of the Credit Agreement. Effective
as of the date hereof, Section 2.15 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
Section 2.15 Refinancing of Swing Loans. Upon one Business
Day's prior written notice from Paribas to the Agent, the Swing Loans
Borrowers and the Lenders at any time and from time to time
(including, without limitation, at any time following the occurrence
of an Event of Default), each Lender (including, without limitation,
Paribas) agrees, severally and not jointly, as provided in Section
2.1(a), and notwithstanding (i) anything to the contrary contained in
this Article 2 or elsewhere in this Agreement or (ii) any excess of
Outstanding Credit over the Borrowing Base, the existence of any Event
of Default or the inability of or failure by F.Y.I. or any Subsidiary
to comply with any condition precedent set forth in Article 6 (which
conditions precedent shall not apply to this Section 2.15), to make a
Revolving Credit Loan, which Loan shall be a Prime Rate Loan, in an
amount equal to such Lender's pro rata portion, based upon its
Revolving Credit Loans
FIRST AMENDMENT TO CREDIT AGREEMENT Page 7
<PAGE> 8
Commitment, of the aggregate principal amount of the Swing Loans then
outstanding (up to but not in excess of the amount which, when added
to such Lender's pro rata portion, based on its Revolving Credit Loans
Commitment, of the then-outstanding Revolving Credit Loans and Letter
of Credit Liabilities relating to Letters of Credit issued pursuant to
the Revolving Credit Loans Commitments, would equal such Lender's
Revolving Credit Loans Commitment), and the proceeds of all such Loans
by the Lenders shall be promptly applied by the Agent to repay
principal and accrued and unpaid interest with respect to the Swing
Loans then outstanding.
16. Amendment to Section 9.18 of the Credit Agreement. Effective
as of the date hereof, Section 9.18 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
Section 9.18 Second-Tier Subsidiaries. No Borrower other
than F.Y.I. shall have any Subsidiaries, and F.Y.I. shall not have any
Subsidiaries which are Subsidiaries of Subsidiaries; provided,
however, that for the period from the Closing Date until (but not
after) April 18, 1998, Deliverex may have as a Subsidiary Peninsula
Record Management, Inc., a California corporation.
17. Representations and Warranties. The representations and
warranties made by the Borrowers in the Loan Documents, as the same are amended
hereby, are true and correct at the time this Amendment is executed and
delivered, except to the extent that such representations and warranties are
expressly by their terms made only as of the Closing Date or another specified
date.
18. Costs. The Borrowers jointly and severally agree to pay all
costs incurred in connection with the negotiation, preparation, execution and
consummation of this Amendment and the transactions contemplated by this
Amendment including, without limitation, the fees and expenses of counsel to
the Agent and the Lenders.
19. Miscellaneous.
(a) Headings. Section headings are for reference only,
and shall not affect the interpretation or meaning of any provision of
this Amendment.
(b) No Waiver. No failure on the part of the Agent or
the Lenders to exercise, and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under the Loan
Documents shall operate as a waiver thereof, and no single or partial
exercise of any right, power, or privilege under the Loan Documents
shall preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege.
(c) Effect of this Amendment. The Credit Agreement, as
amended by this Amendment, shall remain in full force and effect
except that any reference therein, or in
FIRST AMENDMENT TO CREDIT AGREEMENT Page 8
<PAGE> 9
any other Loan Document, referring to the Credit Agreement, shall be
deemed to refer to the Credit Agreement, as amended by this Amendment.
(d) Governing Law. EXCEPT TO THE EXTENT THAT THE CREDIT
AGREEMENT EXPRESSLY PROVIDES OTHERWISE, THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF TEXAS.
(e) Counterparts. This Amendment may be executed by the
different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same Amendment.
(f) NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED
BY THIS AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS
THE ENTIRE AGREEMENT AMONG THE PARTIES, AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective duly authorized officers as of the date first
above written.
BORROWERS:
F.Y.I. INCORPORATED
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
IMAGENT ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
FIRST AMENDMENT TO CREDIT AGREEMENT Page 9
<PAGE> 10
RESEARCHERS ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
RECORDEX ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
DPAS ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
LEONARD ARCHIVES ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
DELIVEREX ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
FIRST AMENDMENT TO CREDIT AGREEMENT Page 10
<PAGE> 11
PERMANENT RECORDS ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
DELIVEREX SACRAMENTO ACQUISITION
CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
B&B (BALTIMORE-WASHINGTON)
ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
PREMIER ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
ROBERT A. COOK ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
FIRST AMENDMENT TO CREDIT AGREEMENT Page 11
<PAGE> 12
PENINSULA RECORD MANAGEMENT, INC.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Vice President
RAC (CALIFORNIA) ACQUISITION CORP.
By: /s/ David Lowenstein
----------------------------
Name: David Lowenstein
Title: Executive Vice President
AGENT:
BANQUE PARIBAS, as Agent
By: /s/ Clark C. King III
----------------------------
Name: Clark C. King III
Title: Vice President
By: /s/ Mark A. Radzik
----------------------------
Name: Mark A. Radzik
Title: Vice President
LENDERS:
BANQUE PARIBAS
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
FIRST AMENDMENT TO CREDIT AGREEMENT Page 12
<PAGE> 13
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
FIRST SOURCE FINANCIAL LLP
By: FIRST SOURCE FINANCIAL, INC.,
its Agent/Manager
By: /s/ John Walding
----------------------------
Name: John Walding
Title: Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Karen Phillips
----------------------------
Name: Karen Phillips
Title: Vice President
FIRST AMENDMENT TO CREDIT AGREEMENT Page 13
<PAGE> 1
EXHIBIT 10.21
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY
INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED AND THE TERMS
AND CONDITIONS HEREOF. THE HOLDER OF THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF ARE SUBJECT TO THE RESTRICTIONS HEREIN SET FORTH.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME, MAY 21, 2003
****************************************
No. 4
WARRANT
to
PURCHASE COMMON STOCK
of
F.Y.I. INCORPORATED
****************************************
This certifies that, for good and valuable consideration,
F.Y.I. Incorporated, a Delaware corporation (the "Company"), grants to Ed H.
Bowman, Jr. ("Mr. Bowman") or permitted registered assigns (the "Warrantholder"
or "Warrantholders"), the right to subscribe for and purchase from the Company,
at $20.00 per share (the "Exercise Price"), Fifty Thousand (50,000) shares, of
the Company's Common Stock, par value $0.01 per share (the "Common Stock"),
subject to the provisions and upon the terms and conditions herein set forth.
The Exercise Price and the number of Warrant Shares are subject to adjustment
from time to time as provided in Section 5.
<PAGE> 2
1. Duration and Exercise of Warrant; Limitation on Exercise; Payment of
Taxes.
1.1 Duration and Exercise of Warrant.
(a) This Warrant may be exercised to purchase 50% of the
underlying shares from and after 9:00 A.M. New York City time on May 21, 1998
(the "Initial Exercise Date") and the remaining 50% of the underlying shares on
May 21, 1999 (the "Second Exercise Date"), the Initial Exercise Date or the
Second Exercise Date, as applicable (the "Exercise Date") and to and including
5:00 P.M. New York City time on May 21, 2003 (the "Expiration Date"). In
addition, in the event of a Change in Control of the Company, the right to
exercise 100% of the underlying shares shall immediately vest. A "Change in
Control" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit
plan of the Company, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act")) of any voting security
of the Company and immediately after such acquisition such Person is,
directly or indirectly, the Beneficial Owner of voting securities
representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Company;
(ii) the individuals (A) who, as of the closing date of the
Initial Public Offering, constitute the Board (the "Original
Directors") or (B) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election) or (C) who are elected to the
Board and whose election, or nomination for election, to the Board was
approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election) (such individuals being the "Continuing
Directors"), cease for any reason to constitute a majority of the
members of the Board;
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
-2-
<PAGE> 3
(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).
(b) The rights represented by this Warrant may be exercised
by the Warrantholder of record, in whole, or from time to time in part, by (a)
surrender of this Warrant, accompanied by the Exercise Form annexed hereto (the
"Exercise Form") duly executed by the Warrantholder of record and specifying
the number of Warrant Shares to be purchased, to the Company at the office of
the Company located at 3232 McKinney Avenue, Suite 900, Dallas, Texas 75204 (or
such other office or agency of the Company as it may designate by notice to the
Warrantholder at the address of such Warrantholder appearing on the books of
the Company) during normal business hours on any day (a "Business Day") other
than a Saturday, Sunday or a day on which the New York Stock Exchange is
authorized to close or on which the Company is otherwise closed for business (a
"Nonbusiness Day") on or after 9:00 A.M. New York City time on the Exercise
Date but not later than 5:00 P.M. on the Expiration Date (or 5:00 P.M. on the
next succeeding Business Day, if the Expiration Date is a Nonbusiness Day), (b)
delivery of payment to the Company in cash or by certified or official bank
check in New York Clearing House Funds, of the Exercise Price for the number of
Warrant Shares specified in the Exercise Form and (c) such documentation as to
the identity and authority of the Warrantholder as the Company may reasonably
request. Such Warrant Shares shall be deemed by the Company to be issued to
the Warrantholder as the record holder of such Warrant Shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for the Warrant Shares as aforesaid. Certificates for the Warrant
Shares specified in the Exercise Form shall be delivered to the Warrantholder
as promptly as practicable, and in any event within 10 business days,
thereafter. The stock certificates so delivered shall be in denominations of
at least 1,000 shares each or such other denomination as may be specified by
the Warrantholder and agreed upon by the Company, and shall be issued in the
name of the Warrantholder or, if permitted by subsection 1.5 and in accordance
with the provisions thereof, such other name as shall be designated in the
Exercise Form. If this Warrant shall have been exercised only in part, the
Company shall, at the time of delivery of the certificates for the Warrant
Shares, deliver to the Warrantholder a new Warrant evidencing the rights to
purchase the remaining Warrant Shares, which new Warrant shall in all other
respects be identical with this Warrant. No adjustments or payments shall be
made on or in respect of Warrant Shares issuable on the exercise of this
Warrant for any cash dividends paid or payable to holders of record of Common
Stock prior to the date as of which the Warrantholder shall be deemed to be the
record holder of such Warrant Shares.
1.2 Limitation on Exercise. If this Warrant is not
exercised prior to 5:00 P.M. on the Expiration Date (or the next succeeding
Business Day, if the Expiration Date is a Nonbusiness Day), this Warrant, or
any new Warrant issued pursuant to Section 1.1, shall cease to be exercisable
and shall become void and all rights of the Warrantholder hereunder
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<PAGE> 4
shall cease. This Warrant shall not be exercisable and no Warrant Shares shall
be issued hereunder, prior to 9:00 A.M. New York City time on the Exercise
Date.
1.3 Exercise Upon Termination. Upon termination of Mr.
Bowman's employment with the Company, this Warrant may be exercised after the
Initial Exercise Date and to and including the Expiration Date. Subject to the
foregoing, in the event of Mr. Bowman's death, this Warrant may be exercised by
Mr. Bowman's legal representative through the Expiration Date.
1.4 Payment of Taxes. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect to any transfer involved in the issuance and delivery of any
certificates for Warrant Shares in a name other than that of the then
Warrantholder as reflected upon the books of the Company.
1.5 Transfer Restriction and Legend. (a) Neither this
Warrant nor any interest or participation therein may be in any manner
transferred or disposed of, in whole or in part, at any time, without the
consent of the Company, except by will or pursuant to the laws of descent and
distribution or otherwise by operation of law.
(b) Without limiting the generality of the foregoing,
neither this Warrant nor any of the Warrant Shares, nor any interest or
participation in either, may be in any manner transferred or disposed of, in
whole or in part, except in compliance with applicable United States federal
and state securities laws. This limitation shall be in addition to the
limitation set forth in Section 1.5(a) above.
Each certificate for Warrant Shares and any Warrant issued at
any time in exchange or substitution for any Warrant bearing such a legend
shall bear a legend similar in effect to the foregoing paragraph unless, in the
opinion of counsel for the Company, the Warrant need no longer be subject to
the restriction contained herein. The provisions of this subsection 1.5 shall
be binding upon all subsequent holders of this Warrant, if any. Warrant Shares
transferred to the public as expressly permitted by, and in accordance with,
the provisions of this Warrant shall thereafter cease to be deemed to be
"Warrant Shares" for purposes hereof.
1.6 Divisibility of Warrant. This Warrant may be divided
into warrants representing one Warrant Share or multiples thereof, upon
surrender at the principal office of the Company on any Business Day, without
charge to any Warrantholder, except as provided below. The Warrantholder will
be charged for reasonable out-of-pocket costs incurred by the Company in
connection with the division of this Warrant into Warrants representing fewer
than one thousand (1,000) Warrant Shares. Upon any such division, and, if
permitted by subsection 1.5 and in accordance with the provisions thereof, the
Warrants may be transferred
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<PAGE> 5
of record to a name other than that of the Warrantholder of record; provided,
however, that the Warrantholder shall be required to pay any and all transfer
taxes with respect thereto.
2. Reservation and Listing of Shares, Etc.
All Warrant Shares which are issued upon the exercise of the
rights represented by this Warrant shall, upon issuance and payment of the
Exercise Price, be validly issued, fully paid and nonassessable and free from
all taxes, liens, security interests, charges and other encumbrances with
respect to the issue thereof other than taxes in respect of any transfer
occurring contemporaneously with such issue. During the period within which
this Warrant may be exercised, the Company shall at all times have authorized
and reserved, and keep available free from preemptive rights, a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant,
and shall at its expense use its best efforts to procure such listing thereof
(subject to official notice of issuance) as then may be required on all stock
exchanges on which the Common Stock is then listed. The Company shall, from
time to time, take all such action as may be required to assure that the par
value per share of the Warrant Shares is at all times equal to or less than the
then effective Exercise Price.
3. Exchange, Loss or Destruction of Warrant.
If permitted by subsection 1.5 or 1.6 and in accordance with
the provisions thereof, upon surrender of this Warrant to the Company with a
duly executed instrument of assignment and funds sufficient to pay any transfer
tax, the Company shall, without charge, execute and deliver a new Warrant of
like tenor in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of such bond or
indemnification as the Company may reasonably require, and, in the case of such
mutilation, upon surrender and cancellation of this Warrant, the Company will
execute and deliver a new Warrant of like tenor. The term "Warrant" as used
herein includes any Warrants issued in substitution or exchange of this
Warrant.
4. Ownership of Warrant.
The Company may deem and treat the person in whose name this
Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
subsections 1.1 and 1.5 or in Section 3.
5. Certain Adjustments.
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<PAGE> 6
The Exercise Price at which Warrant Shares may be purchased
hereunder, and the number of Warrant Shares to be purchased upon exercise
hereof, are subject to change or adjustment as follows:
5.1 The number of Warrant Shares purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
as follows:
(a) In case the Company shall (i) pay a dividend in
shares of Common Stock or make a distribution in shares of Common
Stock (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock or (iv) issue by reclassification of its shares of Common
Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which
the Company is the surviving corporation), the number of Warrant
Shares purchasable upon exercise of this Warrant shall be adjusted so
that the Warrantholder shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive after the happening
of any of the events described above, had this Warrant been exercised
immediately prior to the happening of such event or any record date
with respect thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
(b) In case the Company shall:
(I) issue rights, options or warrants to all holders
of its outstanding Common Stock, without any charge
to such holders, entitling them to subscribe for or
purchase shares of Common Stock at a price per share
which is lower at the record date for the
determination of stockholders entitled to receive
such rights, options or warrants than the then
current market price per share of Common Stock, or
(ii) distribute to all holders of its shares of
Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions payable
out of consolidated earnings or earned surplus and
dividends or distributions referred to in paragraph
(a) of this subsection 5.1) or rights, options or
warrants, or convertible or exchangeable securities
containing the right to subscribe for or purchase
shares of Common Stock, appropriate adjustments shall
be made to the number of Warrant Shares purchasable
upon the exercise of the Warrant and/or the Exercise
Price in order to preserve the relative rights and
interests of the Warrantholders, such adjustments to
be made by the good faith determination of the Board
of Directors of the Company.
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<PAGE> 7
5.2 Voluntary Adjustment by the Company. The Company
may, at its option, at any time during the term of the Warrants, reduce the
then current Exercise Price to any amount, consistent with applicable law,
deemed appropriate by the Board of Directors of the Company.
5.3 Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the Company shall promptly mail first class, postage prepaid, to all
Warrantholders, notice of such adjustment.
5.4 No Adjustment for Cash Dividends. No adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
5.5 Preservation of Purchase Rights Upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale, transfer or
lease to another corporation of all or substantially all of the property of the
Company, the Company or such successor or purchasing corporation, as the case
may be, shall execute with the Warrantholders an agreement that the
Warrantholders shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action to purchase upon exercise of
this Warrant the kind and amount of shares and other securities and property
which such holder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, transfer or lease had this
Warrant been exercised immediately prior to such action; provided, however,
that no adjustment in respect of cash dividends, interest or other income on or
from such shares or other securities and property shall be made during the term
of this Warrant or upon the exercise of this Warrant. Such agreement shall
provide for adjustments, which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 5. The provisions of this
subsection 5.5 shall apply similarly to successive consolidations, mergers,
sales, transfers or leases.
6. Registration Rights
6.1 Piggy-Back Registration Rights.
At any time following the closing of the Initial Public
Offering, whenever the Company proposes to register any Company Stock for its
own or others account under the Securities Act of 1933, as amended (the
"Securities Act"), for a public offering for cash, but other than a
registration relating to employee benefit plans, the Company will give each
Warrantholder prompt written notice of its intent to do so. Upon the written
request of any Warrantholder given within 30 days after receipt of such notice,
the Company will use its best efforts to cause to be included in such
registration all of the Company Stock which such Warrantholder requests,
provided that the Company shall have the right to reduce the number of shares
included in such registration if the Company is advised in writing in good
faith by
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<PAGE> 8
any managing underwriter of the securities being offered pursuant to any
registration statement under this Section 6.1 that the number of shares to be
sold by persons other than the Company is greater than the number of such
shares which can be offered without adversely affecting the offering, the
Company may reduce pro rata the number of shares offered for the accounts of
such persons (based upon the number of shares held by such person) to a number
deemed satisfactory by such managing underwriter.
6.2 Other Arrangements. In connection with the
registration of Warrant Shares in accordance with subsections 6.1, the holders
who elect to have their Warrant Shares included therein shall so notify the
Company and furnish the Company with such appropriate information (including,
but not limited to, the manner in which such shares are to be sold) in
connection therewith as the Company shall reasonably request. Such
notification shall be made, and such information furnished, in writing within
ten (10) calendar days of receipt of the notices specified in subsections 6.1.
In connection with any such registration, the Company agrees to:
(a) Use its best efforts to register or qualify the
Warrant Shares for offer or sale under state securities or "blue sky"
laws of such jurisdictions in which the holders thereof shall
reasonably designate, and use its best efforts to do any and all other
acts and things which may be necessary or advisable to enable the
holders to consummate the sale, transfer or other disposition of such
Warrant Shares in any jurisdiction; provided, however, that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now qualified or to take any other action
which would subject it to general service of process in any
jurisdiction where it is not then so subject or subject itself to
taxation in any such jurisdiction;
(b) Furnish to the holders requesting registration of the
Warrant Shares (I) at least three (3) calendar days before the filing
thereof with the Securities and Exchange Commission (the "Commission")
a proof of the latest draft of the registration statement and, if
requested, to extend invitations to the holders of the Piggy-Back
Shares to attend all meetings at which the Company and the underwriter
of such offering are present at which such registration statement is
discussed, and (ii) promptly after the filing thereof, a copy of the
registration statement as filed and any amendment to such registration
statement and all exhibits thereto and consents of experts filed or to
be filed therewith;
(c) Furnish to the holders requesting registration of the
Warrant Shares at the Company's expense such number of copies of such
registration statement and all amendments thereto and of such
prospectuses (including each preliminary, amended, or supplemental
prospectus) as such persons may reasonably request in order to
facilitate the sale or transfer of his or its Warrant Shares;
-8-
<PAGE> 9
(d) Make available to the Company's security holders, not
later than forty-five (45) calendar days after the end of the
Company's first fiscal quarter in which the first anniversary of the
effective date of the registration statement occurs (or ninety (90)
calendar days if the end of the first fiscal quarter in which the
first anniversary of the effective date occurs coincides with the end
of the Company's fiscal year), an earnings statement covering a period
of at least twelve (12) consecutive months, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act or
Rule 158 promulgated under the Securities Act;
(e) Use its best efforts to list the Warrant Shares on
any securities exchange on which other shares of Common Stock are
listed;
(f) Afford to the persons requesting registration an
opportunity to make such examination and inquiry into the financial
position, business and affairs of the Company and its subsidiaries as
such persons or their counsel may reasonably deem necessary so as to
satisfy themselves as to the accuracy and completeness of the
registration statement; and
(g) Pay all costs incident to such registration other
than the cost of any counsel or other advisers to the holder
requesting registration and any brokerage or underwriting commissions
in connection with the sale of the Warrant Shares so registered.
The Company shall have sole control in connection with the preparation, filing,
amending and supplementing of any registration statement, including the right
to withdraw the same or delay the effectiveness thereof when, in the sole
judgment of the Board of Directors of the Company, the pendency of such
registration statement or the effectiveness thereof would impose an undue
burden upon the ability of the Company to proceed with any other material
financing for its own account or any material corporate transaction, including,
but not limited to, a reorganization, recapitalization, merger, consolidation
or material acquisition of the securities or assets of another firm or
corporation; and the Company shall be required to file a new registration
statement or to proceed with such actions as reasonably may be required to
cause the registration statement to become effective within a reasonable time
after the consummation of the event or transaction which required such
withdrawal or delay.
7. Miscellaneous.
7.1 Entire Agreement. This Warrant constitutes the
entire agreement between the Company and the Warrantholder with respect to this
Warrant and Warrant Shares.
7.2 Binding Effects; Benefits. This Warrant shall inure
to the benefit of and shall be binding upon the Company, the Warrantholder and
holders of Warrant Shares and their respective heirs, legal representatives,
successors and assigns. Nothing in this Warrant,
-9-
<PAGE> 10
expressed or implied, is intended to or shall confer on any person other than
the Company, the Warrantholders and holders of Warrant Shares, or their
respective heirs, legal representatives, successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Warrant or the
Warrant Shares.
7.3 Amendments and Waivers. This Warrant may not be
modified or amended except by an instrument in writing signed by the Company
and Warrantholders that hold Warrants entitling them to purchase at least 50%
of the Warrant Shares. The Company, any Warrantholder or holders of Warrant
Shares may, by an instrument in writing, waive compliance by the other party
with any term or provision of this Warrant on the part of such other party
hereto to be performed or complied with. The waiver by any such party of a
breach of any term or provision of this Warrant shall not be construed as a
waiver of any subsequent breach.
7.4 Section and Other Headings. The section and other
headings contained in this Warrant are for reference purposes only and shall
not be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
7.5 Further Assurances. Each of the Company, the
Warrantholders and holders of Warrant Shares shall do and perform all such
further acts and things and execute and deliver all such other certificates,
instruments and/or documents (including without limitation, such proxies and/or
powers of attorney as may be necessary or appropriate) as any party hereto may,
at any time and from time to time, reasonably request in connection with the
performance of any of the provisions of this Warrant.
7.6 Notices. All demands, requests, notices and other
communications required or permitted to be given under this Warrant shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by United States certified or registered first class mail, postage
prepaid, to the parties hereto at the following addresses or at such other
address as any party hereto shall hereafter specify by notice to the other
party hereto:
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<PAGE> 11
(a) if to the Company, addressed to:
F.Y.I. Incorporated
3232 McKinney Avenue
Suite 900
Dallas, Texas 75204
Attention: Chairman and Chief Development Officer
(b) if to any Warrantholder or holder of Warrant Shares,
addressed to the address of such person appearing on the books of the
Company.
Except as otherwise provided herein, all such demands,
requests, notices and other communications shall be deemed to have been
received on the date of personal delivery thereof or on the third Business Day
after the mailing thereof.
7.7 Separability. Any term or provision of this Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable any other term or
provision of this Warrant or affecting the validity or enforceability of any of
the terms or provisions of this Warrant in any other jurisdiction.
7.8 Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Warrantholder an amount in cash equal to
such fraction multiplied by the current market price (as determined as of the
date of exercise, and with reference to the applicable trading market, in
accordance with paragraph (d) of subsection 5.1) of a share of such stock as of
the date of such exercise.
7.9 Rights of the Holder. The Warrantholder shall not,
solely by virtue of this Warrant, be entitled to any rights of a stockholder of
the Company, either at law or in equity.
7.10 Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts made and performed in Delaware.
7.11 Effect of Stock Splits, etc. Whenever any rights
under this Agreement are available only when at least a specified minimum
number of Warrant Shares is involved, such number shall be appropriately
adjusted to reflect any stock split, stock dividend, combination of securities
into a smaller number of securities or reclassification of stock.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
F.Y.I. INCORPORATED
By:
--------------------------------
Name: Thomas C. Walker
Title: Chairman and
Chief Development Officer
Dated:
-12-
<PAGE> 13
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned, the record holder of this Warrant, hereby
irrevocably elects to exercise the right, represented by this Warrant, to
purchase __________ of the Warrant Shares and herewith tenders payment for such
Warrant Shares to the order of F.Y.I. INCORPORATED, in the amount of $_______
in accordance with the terms of this Warrant. The undersigned requests that a
certificate for such Warrant Shares be registered in the name of
_________________________________ and that such certificate be delivered to
_________________________ whose address is ____________________________________.
Date Signature
--------------------------- -------------------------------
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<PAGE> 1
EXHIBIT 10.22
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY
INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED AND THE TERMS
AND CONDITIONS HEREOF. THE HOLDER OF THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF ARE SUBJECT TO THE RESTRICTIONS HEREIN SET FORTH.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME, [5 YEARS FROM THE INITIAL EXERCISE
DATE]
****************************************
No. 3
WARRANT
to
PURCHASE COMMON STOCK
of
F.Y.I. INCORPORATED
****************************************
This certifies that, for good and valuable consideration,
F.Y.I. Incorporated, a Delaware corporation (the "Company"), grants to Robert
Irvine ("Mr. Irvine") or permitted registered assigns (the "Warrantholder" or
"Warrantholders"), the right to subscribe for and purchase from the Company, at
the price per share offered in the Company's initial public offering (the
"IPO") (the "Exercise Price"), Fifty Thousand (50,000) shares, of the Company's
Common Stock, par value $0.01 per share (the "Common Stock"), subject to the
provisions and upon the terms and conditions herein set forth. The Exercise
Price and the number of Warrant Shares are subject to adjustment from time to
time as provided in Section 5.
<PAGE> 2
I. Duration and Exercise of Warrant; Limitation on Exercise;
Payment of Taxes.
A. Duration and Exercise of Warrant.
(a) This Warrant may be exercised to purchase 50% of the
underlying shares from and after 9:00 A.M. New York City time on [2 years from
closing of the initial public offering of shares offered to the public pursuant
to Registration Statement 33-98608 (the "Initial Public Offering")] (the
"Initial Exercise Date") and the remaining 50% of the underlying shares on [3
years from closing of the Initial Public Offering (the "Second Exercise Date"),
the Initial Exercise Date or the Second Exercise Date, as applicable (the
"Exercise Date") and to and including 5:00 P.M. New York City time on [5 years
from closing of the Initial Exercise Date] (the "Expiration Date"). In
addition, in the event of a Change in Control of the Company, the right to
exercise 100% of the underlying shares shall immediately vest. A "Change in
Control" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit
plan of the Company, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities and Exchange
Act of 1934, as amended (the" Exchange Act")) of any voting security
of the Company and immediately after such acquisition such Person is,
directly or indirectly, the Beneficial Owner of voting securities
representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Company;
(ii) the individuals (A) who, as of the closing date of the
Initial Public Offering, constitute the Board (the "Original
Directors") or (B) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election) or (C) who are elected to the
Board and whose election, or nomination for election, to the Board was
approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election) (such individuals being the "Continuing
<PAGE> 3
Directors"), cease for any reason to constitute a majority of the
members of the Board;
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the
Company).
(b) The rights represented by this Warrant may be exercised
by the Warrantholder of record, in whole, or from time to time in part, by (a)
surrender of this Warrant, accompanied by the Exercise Form annexed hereto (the
"Exercise Form") duly executed by the Warrantholder of record and specifying
the number of Warrant Shares to be purchased, to the Company at the office of
the Company located at 2911 Turtle Creek Boulevard, Suite 300, Dallas, Texas
75219 (or such other office or agency of the Company as it may designate by
notice to the Warrantholder at the address of such Warrantholder appearing on
the books of the Company) during normal business hours on any day (a "Business
Day") other than a Saturday, Sunday or a day on which the New York Stock
Exchange is authorized to close or on which the Company is otherwise closed for
business (a "Nonbusiness Day") on or after 9:00 A.M. New York City time on the
Exercise Date but not later than 5:00 P.M. on the Expiration Date (or 5:00 P.M.
on the next succeeding Business Day, if the Expiration Date is a Nonbusiness
Day), (b) delivery of payment to the Company in cash or by certified or
official bank check in New York Clearing House Funds, of the Exercise Price for
the number of Warrant Shares specified in the Exercise Form and (c) such
documentation as to the identity and authority of the Warrantholder as the
Company may reasonably request. Such Warrant Shares shall be deemed by the
Company to be issued to the Warrantholder as the record holder of such Warrant
Shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for the Warrant Shares as aforesaid.
Certificates for the Warrant Shares
<PAGE> 4
specified in the Exercise Form shall be delivered to the Warrantholder as
promptly as practicable, and in any event within 10 business days, thereafter.
The stock certificates so delivered shall be in denominations of at least 1,000
shares each or such other denomination as may be specified by the Warrantholder
and agreed upon by the Company, and shall be issued in the name of the
Warrantholder or, if permitted by subsection 1.5 and in accordance with the
provisions thereof, such other name as shall be designated in the Exercise
Form. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the certificates for the Warrant Shares,
deliver to the Warrantholder a new Warrant evidencing the rights to purchase
the remaining Warrant Shares, which new Warrant shall in all other respects be
identical with this Warrant. No adjustments or payments shall be made on or in
respect of Warrant Shares issuable on the exercise of this Warrant for any cash
dividends paid or payable to holders of record of Common Stock prior to the
date as of which the Warrantholder shall be deemed to be the record holder of
such Warrant Shares.
B. Limitation on Exercise. This Warrant may only be
vested if, at the time of such vesting, Mr. Irvine is an Employee of the
Company, except as provided in Section 1.3. If this Warrant is not exercised
prior to 5:00 P.M. on the Expiration Date (or the next succeeding Business Day,
if the Expiration Date is a Nonbusiness Day), this Warrant, or any new Warrant
issued pursuant to Section 1.1, shall cease to be exercisable and shall become
void and all rights of the Warrantholder hereunder shall cease. This Warrant
shall not be exercisable and no Warrant Shares shall be issued hereunder, prior
to 9:00 A.M. New York City time on the Exercise Date.
C. Exercise Upon Termination. Upon termination of Mr.
Irvine's employment with the Company, this Warrant may be exercised during the
three month period following such termination of employment, but only to the
extent that this Warrant was exercisable immediately prior to such termination
of
<PAGE> 5
employment. Notwithstanding the foregoing, if such termination is for cause,
the right to exercise this Warrant shall terminate upon such termination. In
no event shall this Warrant be exercisable for more than the maximum number of
shares that the Warrantholder was entitled to purchase at the date of
termination of the relationship with the Company. Subject to the foregoing, in
the event of Mr. Irvine's death, this Warrant may be exercised by Mr. Irvine's
legal representative through the Expiration Date.
D. Payment of Taxes. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect to any transfer involved in the issuance and delivery of any
certificates for Warrant Shares in a name other than that of the then
Warrantholder as reflected upon the books of the Company.
E. Transfer Restriction and Legend. 1. Neither this
Warrant nor any interest or participation therein may be in any manner
transferred or disposed of, in whole or in part, at any time, without the
consent of the Company, except by will or pursuant to the laws of descent and
distribution or otherwise by operation of law.
2. Without limiting the generality of the foregoing,
neither this Warrant nor any of the Warrant Shares, nor any interest or
participation in either, may be in any manner transferred or disposed of, in
whole or in part, except in compliance with applicable United States federal
and state securities laws. This limitation shall be in addition to the
limitation set forth in Section 1.5(a) above.
Each certificate for Warrant Shares and any Warrant issued at
any time in exchange or substitution for any Warrant bearing such a legend
shall bear a legend similar in effect to the foregoing paragraph unless, in the
opinion of counsel for the Company, the Warrant need no longer be subject to
the restriction contained herein. The provisions of this subsection 1.5 shall
be binding upon all subsequent holders of this Warrant, if any. Warrant Shares
transferred to the public as expressly permitted by, and in accordance with,
the provisions of this Warrant shall thereafter cease to be deemed to be
"Warrant Shares" for purposes hereof.
<PAGE> 6
F. Divisibility of Warrant. This Warrant may be divided
into warrants representing one Warrant Share or multiples thereof, upon
surrender at the principal office of the Company on any Business Day, without
charge to any Warrantholder, except as provided below. The Warrantholder will
be charged for reasonable out-of-pocket costs incurred by the Company in
connection with the division of this Warrant into Warrants representing fewer
than one thousand (1,000) Warrant Shares. Upon any such division, and, if
permitted by subsection 1.5 and in accordance with the provisions thereof, the
Warrants may be transferred of record to a name other than that of the
Warrantholder of record; provided, however, that the Warrantholder shall be
required to pay any and all transfer taxes with respect thereto.
II. Reservation and Listing of Shares, Etc.
All Warrant Shares which are issued upon the exercise of the
rights represented by this Warrant shall, upon issuance and payment of the
Exercise Price, be validly issued, fully paid and nonassessable and free from
all taxes, liens, security interests, charges and other encumbrances with
respect to the issue thereof other than taxes in respect of any transfer
occurring contemporaneously with such issue. During the period within which
this Warrant may be exercised, the Company shall at all times have authorized
and reserved, and keep available free from preemptive rights, a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant,
and shall at its expense use its best efforts to procure such listing thereof
(subject to official notice of issuance) as then may be required on all stock
exchanges on which the Common Stock is then listed. The Company shall, from
time to time, take all such action as may be required to assure that the par
value per share of the Warrant Shares is at all times equal to or less than the
then effective Exercise Price.
III. Exchange, Loss or Destruction of Warrant.
If permitted by subsection 1.5 or 1.6 and in accordance with
the provisions thereof, upon surrender of this Warrant to the Company with a
duly executed instrument of assignment and funds sufficient to pay any transfer
tax, the Company shall, without charge, execute and deliver a new Warrant of
like tenor in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be cancelled. Upon receipt by the Company of
evidence satisfactory to it of the
<PAGE> 7
loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new
Warrant of like tenor. The term "Warrant" as used herein includes any Warrants
issued in substitution or exchange of this Warrant.
IV. Ownership of Warrant.
The Company may deem and treat the person in whose name this
Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
subsections 1.1 and 1.5 or in Section 3.
V. Certain Adjustments.
The Exercise Price at which Warrant Shares may be purchased
hereunder, and the number of Warrant Shares to be purchased upon exercise
hereof, are subject to change or adjustment as follows:
A. The number of Warrant Shares purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
as follows:
1. In case the Company shall (i) pay a dividend in
shares of Common Stock or make a distribution in shares of Common
Stock (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock or (iv) issue by reclassification of its shares of Common
Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which
the Company is the surviving corporation), the number of Warrant
Shares purchasable upon exercise of this Warrant shall be adjusted so
that the Warrantholder shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive after the happening
of any of the events described above, had this
<PAGE> 8
Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately
after the effective date of such event retroactive to the record date,
if any, for such event.
2. In case the Company shall:
(i) issue rights, options or warrants to all
holders of its outstanding Common Stock, without any
charge to such holders, entitling them to subscribe
for or purchase shares of Common Stock at a price per
share which is lower at the record date for the
determination of stockholders entitled to receive
such rights, options or warrants than the then
current market price per share of Common Stock, or
(ii) distribute to all holders of its shares of
Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions payable
out of consolidated earnings or earned surplus and
dividends or distributions referred to in paragraph
(a) of this subsection 5.1) or rights, options or
warrants, or convertible or exchangeable securities
containing the right to subscribe for or purchase
shares of Common Stock,
appropriate adjustments shall be made to the number of Warrant Shares
purchasable upon the exercise of the Warrant and/or the Exercise Price in order
to preserve the relative rights and interests of the Warrantholders, such
adjustments to be made by the good faith determination of the Board of
Directors of the Company.
B. Voluntary Adjustment by the Company. The Company
may, at its option, at any time during the term of the Warrants, reduce the
then current Exercise Price to any amount, consistent with applicable law,
deemed appropriate by the Board of Directors of the Company.
C. Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the Company shall promptly mail
<PAGE> 9
first class, postage prepaid, to all Warrantholders, notice of such adjustment.
D. No Adjustment for Cash Dividends. No adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
E. Preservation of Purchase Rights Upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale, transfer or
lease to another corporation of all or substantially all of the property of the
Company, the Company or such successor or purchasing corporation, as the case
may be, shall execute with the Warrantholders an agreement that the
Warrantholders shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action to purchase upon exercise of
this Warrant the kind and amount of shares and other securities and property
which such holder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, transfer or lease had this
Warrant been exercised immediately prior to such action; provided, however,
that no adjustment in respect of cash dividends, interest or other income on or
from such shares or other securities and property shall be made during the term
of this Warrant or upon the exercise of this Warrant. Such agreement shall
provide for adjustments, which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 5. The provisions of this
subsection 5.5 shall apply similarly to successive consolidations, mergers,
sales, transfers or leases.
6. Registration Rights
6.1 Piggy-Back Registration Rights.
At any time following the closing of the IPO, whenever the
Company proposes to register any Company Stock for its own or others account
under the Securities Act of 1933, as amended (the "Securities Act"), for a
public offering for cash, but other than a registration relating to employee
benefit plans, the Company will give each Warrantholder prompt written notice
of its intent to do so. Upon the written request of any Warrantholder given
within 30 days after receipt of such notice, the Company will use its best
efforts to cause to be included in such registration all of the Company Stock
which such Warrantholder requests, provided
<PAGE> 10
that the Company shall have the right to reduce the number of shares included
in such registration if the Company is advised in writing in good faith by any
managing underwriter of the securities being offered pursuant to any
registration statement under this Section 6.1 that the number of shares to be
sold by persons other than the Company is greater than the number of such
shares which can be offered without adversely affecting the offering, the
Company may reduce pro rata the number of shares offered for the accounts of
such persons (based upon the number of shares held by such person) to a number
deemed satisfactory by such managing underwriter.
6.2 Other Arrangements. In connection with the
registration of Warrant Shares in accordance with subsections 6.1, the holders
who elect to have their Warrant Shares included therein shall so notify the
Company and furnish the Company with such appropriate information (including,
but not limited to, the manner in which such shares are to be sold) in
connection therewith as the Company shall reasonably request. Such
notification shall be made, and such information furnished, in writing within
ten (10) calendar days of receipt of the notices specified in subsections 6.1.
In connection with any such registration, the Company agrees to:
1. Use its best efforts to register or qualify the
Warrant Shares for offer or sale under state securities or "blue sky"
laws of such jurisdictions in which the holders thereof shall
reasonably designate, and use its best efforts to do any and all other
acts and things which may be necessary or advisable to enable the
holders to consummate the sale, transfer or other disposition of such
Warrant Shares in any jurisdiction; provided, however, that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now qualified or to take any other action
which would subject it to general service of process in any
jurisdiction where it is not then so subject or subject itself to
taxation in any such jurisdiction;
2. Furnish to the holders requesting registration of the
Warrant Shares (i) at least three (3) calendar days before the filing
thereof with the Securities and Exchange Commission (the "Commission")
a proof of the latest draft of the registration statement and, if
requested, to extend invitations to the holders of the Piggy-Back
Shares to
<PAGE> 11
attend all meetings at which the Company and the underwriter of such
offering are present at which such registration statement is
discussed, and (ii) promptly after the filing thereof, a copy of the
registration statement as filed and any amendment to such registration
statement and all exhibits thereto and consents of experts filed or to
be filed therewith;
3. Furnish to the holders requesting registration of the
Warrant Shares at the Company's expense such number of copies of such
registration statement and all amendments thereto and of such
prospectuses (including each preliminary, amended, or supplemental
prospectus) as such persons may reasonably request in order to
facilitate the sale or transfer of his or its Warrant Shares;
4. Make available to the Company's security holders, not
later than forty-five (45) calendar days after the end of the
Company's first fiscal quarter in which the first anniversary of the
effective date of the registration statement occurs (or ninety (90)
calendar days if the end of the first fiscal quarter in which the
first anniversary of the effective date occurs coincides with the end
of the Company's fiscal year), an earnings statement covering a period
of at least twelve (12) consecutive months, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act or
Rule 158 promulgated under the Securities Act;
5. Use its best efforts to list the Warrant Shares on
any securities exchange on which other shares of Common Stock are
listed;
6. Afford to the persons requesting registration an
opportunity to make such examination and inquiry into the financial
position, business and affairs of the Company and its subsidiaries as
such persons or their counsel may reasonably deem necessary so as to
satisfy themselves as to the accuracy and completeness of the
registration statement; and
7. Pay all costs incident to such registration other
than the cost of any counsel or other advisers to the holder
requesting registration and any brokerage or underwriting
<PAGE> 12
commissions in connection with the sale of the Warrant Shares so
registered.
The Company shall have sole control in connection with the preparation, filing,
amending and supplementing of any registration statement, including the right
to withdraw the same or delay the effectiveness thereof when, in the sole
judgment of the Board of Directors of the Company, the pendency of such
registration statement or the effectiveness thereof would impose an undue
burden upon the ability of the Company to proceed with any other material
financing for its own account or any material corporate transaction, including,
but not limited to, a reorganization, recapitalization, merger, consolidation
or material acquisition of the securities or assets of another firm or
corporation; and the Company shall be required to file a new registration
statement or to proceed with such actions as reasonably may be required to
cause the registration statement to become effective within a reasonable time
after the consummation of the event or transaction which required such
withdrawal or delay.
7. Miscellaneous.
7.1 Entire Agreement. This Warrant constitutes the
entire agreement between the Company and the Warrantholder with respect to this
Warrant and Warrant Shares.
7.2 Binding Effects; Benefits. This Warrant shall inure
to the benefit of and shall be binding upon the Company, the Warrantholder and
holders of Warrant Shares and their respective heirs, legal representatives,
successors and assigns. Nothing in this Warrant, expressed or implied, is
intended to or shall confer on any person other than the Company, the
Warrantholders and holders of Warrant Shares, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant or the Warrant Shares.
7.3 Amendments and Waivers. This Warrant may not be
modified or amended except by an instrument in writing signed by the Company
and Warrantholders that hold Warrants entitling them to purchase at least 50%
of the Warrant Shares. The Company, any Warrantholder or holders of Warrant
Shares may, by an instrument in writing, waive compliance by the other party
with any term or provision of this Warrant on the part of such other party
hereto
<PAGE> 13
to be performed or complied with. The waiver by any such party of a breach of
any term or provision of this Warrant shall not be construed as a waiver of any
subsequent breach.
7.4 Section and Other Headings. The section and other
headings contained in this Warrant are for reference purposes only and shall
not be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
7.5 Further Assurances. Each of the Company, the
Warrantholders and holders of Warrant Shares shall do and perform all such
further acts and things and execute and deliver all such other certificates,
instruments and/or documents (including without limitation, such proxies and/or
powers of attorney as may be necessary or appropriate) as any party hereto may,
at any time and from time to time, reasonably request in connection with the
performance of any of the provisions of this Warrant.
7.6 Notices. All demands, requests, notices and other
communications required or permitted to be given under this Warrant shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by United States certified or registered first class mail, postage
prepaid, to the parties hereto at the following addresses or at such other
address as any party hereto shall hereafter specify by notice to the other
party hereto:
(a) if to the Company, addressed to:
F.Y.I. Incorporated
2911 Turtle Creek Boulevard
Suite 300
Dallas, Texas 75219
Attention: President and Chief Executive Officer
(b) if to any Warrantholder or holder of Warrant Shares,
addressed to the address of such person appearing on the books of the
Company.
Except as otherwise provided herein, all such demands,
requests, notices and other communications shall be deemed to have been
received on the date of personal delivery thereof or on the third Business Day
after the mailing thereof.
<PAGE> 14
7.7 Separability. Any term or provision of this Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable any other term or
provision of this Warrant or affecting the validity or enforceability of any of
the terms or provisions of this Warrant in any other jurisdiction.
7.8 Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Warrantholder an amount in cash equal to
such fraction multiplied by the current market price (as determined as of the
date of exercise, and with reference to the applicable trading market, in
accordance with paragraph (d) of subsection 5.1) of a share of such stock as of
the date of such exercise.
7.9 Rights of the Holder. The Warrantholder shall not,
solely by virtue of this Warrant, be entitled to any rights of a stockholder of
the Company, either at law or in equity.
7.10 Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts made and performed in Delaware.
7.11 Effect of Stock Splits, etc. Whenever any rights
under this Agreement are available only when at least a specified minimum
number of Warrant Shares is involved, such number shall be appropriately
adjusted to reflect any stock split, stock dividend, combination of securities
into a smaller number of securities or reclassification of stock.
<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
F.Y.I. INCORPORATED
/s/ Ed H. Bowman, Jr.
------------------------------
Name: Ed H. Bowman, Jr.
Title: President and
Chief Executive Officer
Dated: January 23, 1996
<PAGE> 16
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned, the record holder of this Warrant, hereby
irrevocably elects to exercise the right, represented by this Warrant, to
purchase __________ of the Warrant Shares and herewith tenders payment for such
Warrant Shares to the order of F.Y.I. INCORPORATED, in the amount of $_______
in accordance with the terms of this Warrant. The undersigned requests that a
certificate for such Warrant Shares be registered in the name of
_________________________________ and that such certificate be delivered to
_________________________ whose address is ____________________________________.
Date Signature
-------------------------- --------------------------------
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
Deliverex Acquisition Corp.
DPAS Acquisition Corp.
Imagent Acquisition Corp.
Leonard Archives Acquisition Corp.
Permanent Records Acquisition Corp.
Recordex Acquisition Corp.
Researchers Acquisition Corp.
Deliverex Sacramento Acquisition Corp.
B&B (Baltimore-Washington) Acquisition Corp.
Premier Acquisition Corp.
Robert A. Cook Acquisition Corp.
RAC (California) Acquisition Corp.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
report.
ARTHUR ANDERSEN LLP
Dallas, Texas
July 3, 1996
<PAGE> 1
EXHIBIT 23.4
[C.W. AMOS & COMPANY, LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report (and to all references to our Firm)
included in the Current Report on Form 8-K/A, and we consent to the
incorporation by reference in the Registration Statements on Form S-1
(Registration No. 333-1084) of F.Y.I. Incorporated of our report dated March
20, 1996, with respect to the balance sheet of B & B Information and Image
Management, Inc., as of December 31, 1995, and the related statements of
income, stockholder's equity, and cash flows for the year then ended, which
report appears in the Current Report on Form 8-K/A of F.Y.I. Incorporated.
/s/ C. W. Amos & Company, LLC
Baltimore, Maryland
July 3, 1996
<PAGE> 1
EXHIBIT 23.5
[MOSS-ADAMS LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the application of our report dated June 21, 1996 relating
to the combined financial statements of Premier Document Management, Inc. and
Affiliate for the year ended December 31, 1995, which is included in
the Report on Form 8-K/A of F.Y.I. Incorporated. We also consent to the
reference to our Firm as experts in the same registration statement
/s/ Moss Adams LLP
Moss Adams, LLP
Seattle, Washington
July 2, 1996
