<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the quarterly period ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the transition period from ____________ to
____________
Commission file number 0-27444
F.Y.I. INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 75-2560895
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
3232 MCKINNEY AVENUE, SUITE 900, DALLAS, TEXAS 75204
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 953-7555
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of July 31, 1997, 10,116,332 shares of the registrant's Common
Stock, $.01 par value per share, were outstanding.
<PAGE> 2
F.Y.I. INCORPORATED AND SUBSIDIARIES
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements 3
Consolidated Balance Sheets - December 31, 1996 and June 30, 1997 (unaudited) 4
Consolidated Statements of Operations - Three months and six months ended June 30,
1996 and 1997 (unaudited) 5
Consolidated Statements of Cash Flows - Six months ended
June 30, 1996 and 1997 (unaudited) 6
Notes to Consolidated Financial Statements - June 30, 1997 7
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
Item 3 Quantitative and Qualitative Disclosures about Market Risk 14
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders II-1
Item 5 Other Information II-1
Item 6 Exhibits and Reports on Form 8-K II-2
SIGNATURES II-3
</TABLE>
2
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<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
</TABLE>
3
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F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(SEE NOTE 1)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
---- ----
<S> <C>
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 21,352 $ 7,939
Accounts receivable and notes receivable, less allowance of $1,240 and
$1,406, respectively 19,695 24,860
Inventory 522 1,126
Prepaid expenses and other current assets 939 1,539
--------- --------
Total current assets 42,508 35,464
PROPERTY, PLANT AND EQUIPMENT, net 13,303 14,927
GOODWILL AND OTHER INTANGIBLES 43,235 51,349
NOTES RECEIVABLE, STOCKHOLDER - LONG TERM 643 643
OTHER NONCURRENT ASSETS 2,445 2,177
--------- --------
Total assets $ 102,134 $104,560
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $15,219 $11,015
Short-term obligations 250 -
Current maturities of long-term obligations 585 696
Unearned revenue 1,087 1,734
Federal income taxes payable 3,439 448
--------- --------
Total current liabilities 20,580 13,893
LONG-TERM OBLIGATIONS, net of current maturities 4,662 3,862
DEFERRED INCOME TAXES, net of current portion 351 573
--------- --------
Total liabilities 25,593 18,328
--------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
0 shares issued and outstanding - -
Common stock, $.01 par value, 26,000,000 shares authorized,
9,728,726 and 10,076,472 shares issued and outstanding at
December 31, 1996 and June 30, 1997, respectively 97 101
Additional paid-in-capital 74,191 79,561
Retained earnings 2,754 7,071
--------- --------
77,042 86,733
Less - Treasury stock, $.01 par value, 36,670 shares
at December 31, 1996 and June 30, 1997, respectively (501) (501)
--------- --------
Total stockholders' equity 76,541 86,232
--------- --------
Total liabilities and stockholders' equity $ 102,134 $104,560
========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(SEE NOTE 1)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
----------------------- --------------------------
1996 1997 1996 1997
----------- ---------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUE:
Service revenue $ 18,310 $ 32,508 $ 29,470 $ 62,762
Product and other revenue 1,971 1,944 3,032 3,814
Total revenue --------- --------- --------- ---------
20,281 34,452 32,502 66,576
COST OF SERVICES 11,581 20,450 18,691 39,726
COST OF PRODUCTS SOLD 1,279 1,423 2,036 2,774
DEPRECIATION 482 705 746 1,352
--------- --------- --------- ---------
Gross profit 6,939 11,874 11,029 22,724
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,941 7,469 8,367 14,592
AMORTIZATION 63 437 72 852
--------- --------- --------- ---------
Operating income 1,935 3,968 2,590 7,280
OTHER (INCOME) EXPENSE:
Interest expense 140 170 176 355
Interest income (89) (165) (197) (412)
Other (income) expense, net (13) 7 (58) 36
--------- --------- --------- ---------
Income before income taxes 1,897 3,956 2,669 7,301
PROVISION FOR INCOME TAXES 715 1,662 1,018 2,984
--------- --------- --------- ---------
NET INCOME $ 1,182 $ 2,294 $ 1,651 $ 4,317
========= ========= ========= =========
PRO FORMA DATA:
Historical net income $ 1,182 $ -- $ 1,651 $ 4,317
Pro forma compensation differential 378 -- 712 216
Pro forma provision for income taxes 201 -- 340 139
--------- --------- --------- ---------
PRO FORMA NET INCOME $ 1,359 $ 2,294 $ 2,023 $ 4,394
======== ========== ========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,648 9,972 6,564 9,897
======== ========== ========= =========
NET INCOME PER COMMON SHARE $ 0.18 $ 0.23 $ 0.25 $ 0.44
======== ========== ========= =========
PRO FORMA NET INCOME PER COMMON SHARE $ 0.20 $ 0.23 $ 0.31 $ 0.44
======== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
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F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
June 30, June 30,
1996 1997
----------- ---------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,651 $ 4,317
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Depreciation and amortization 818 2,204
Change in operating assets and liabilities:
Accounts receivable 1,028 (3,616)
Inventory (20) (264)
Prepaid expenses and other assets 85 (194)
Accounts payable and accrued liabilities (432) (4,657)
Unearned revenue (2) 533
-------- -------
Net cash provided by (used in) operating activities 3,128 (1,677)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,203) (2,343)
Distribution from partnership 96 60
Cash paid for acquisitions, net of cash received (20,749) (7,777)
-------- -------
Net cash used in investing activities (21,856) (10,060)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance, net of underwriting
discounts and other costs 23,088 295
Distribution to shareholders of pooled companies - (100)
Proceeds from short-term obligations 2,765 20
Proceeds from long-term obligations 8,150 -
Cash paid for debt issuance costs (1,487) -
Principal payments on short-term obligations (3,794) (250)
Principal payments on long-term obligations (6,604) (1,641)
------- -------
Net cash provided by (used in) financing activities 22,118 (1,676)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,390 (13,413)
CASH AND CASH EQUIVALENTS, beginning of period 63 21,352
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 3,453 $ 7,939
========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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F.Y.I. INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying consolidated financial statements and related notes
to consolidated financial statements include: (i) the accounts of F.Y.I.
Incorporated (the "Company" or "F.Y.I."); (ii) the seven document management
services businesses ("Founding Companies") acquired simultaneously with the
closing of F.Y.I.'s initial public offering (the "IPO") on January 23, 1996
based on an effective date of January 31, 1996; and (iii) the companies
acquired in business combinations accounted for under the purchase method of
accounting from their respective acquisition dates; and (iv) give retroactive
effect to the results of the companies acquired in business combinations
accounted for under the pooling-of-interests method of accounting for all
periods presented.
In the opinion of F.Y.I.'s management, the accompanying consolidated
financial statements include the accounts of the Company and all adjustments
necessary to present fairly the Company's financial position at June 30, 1997,
its results of operations for the three months and six months ended June 30,
1996 and 1997, and its cash flows for the six months ended June 30, 1996 and
1997. All significant intercompany transactions have been eliminated. Although
the Company believes that the disclosures are adequate to make the information
presented not misleading, certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission (the
"Commission"). These consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto in F.Y.I.'s Annual Report on Form 10-K filed with the
Commission on March 11, 1997, and the Company's Current Report on Form 8-K
filed with the Commission on April 9, 1997. The results of operations for the
interim periods ended June 30, 1997 and 1996 will not be indicative of the
results for the full year because of the impact of acquisitions recorded as
purchases, whose results are only included subsequent to the purchase date.
Certain prior period amounts have been reclassified to make their
presentation consistent with the current year.
2. PRO FORMA NET INCOME
The Company acquired The Rust Consulting Group, Inc. ("Rust") in
December 1996, MAVRICC Management Systems, Inc. and a related company, MMS
Escrow and Transfer Agency, Inc. (collectively, "MAVRICC"), in March 1997 and
Input of Texas, Inc. ("Input") in March 1997, all in transactions that were
accounted for as poolings-of-interests (collectively, the "Pooled Companies").
The Pooled Companies had previously been managed as independent,
privately-held companies operating under a variety of tax structures.
Therefore, selling, general and administrative expenses for the historical
periods reflect compensation and related benefits that the owners and certain
key employees had received from the businesses during those periods. In
connection with the acquisitions, the owners and certain key employees have
entered into employment agreements that provide for compensation and related
benefits at levels lower
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than the historical amounts. The differential between the historical
compensation and the compensation set forth in the employment agreements is
referred to as the "Compensation Differential." The pro forma data present
compensation at the levels the owners and certain key employees have agreed to
receive subsequent to the acquisitions. In addition, the pro forma data
present the incremental provision for taxes as if all entities had been subject
to federal and state income taxes and include the impact of the Compensation
Differential discussed above.
3. WEIGHTED AVERAGE SHARES OUTSTANDING
The number of shares (in thousands) used in calculating net income per
share was determined as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
------------------- --------------------
<S> <C> <C> <C> <C>
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
------- ------- ------ -------
Outstanding F.Y.I. shares 6,632 9,956 6,548 9,881
Warrants to purchase stock under the treasury stock method 16 16 16 16
------- ------ ------- -------
Number of shares used in net income per share calculation
6,648 9,972 6,564 9,897
======= ======= ======= =======
</TABLE>
The Company intends to adopt SFAS No. 128 "Earnings Per Share"
effective December 15, 1997. This statement requires the replacement of
primary earnings per share with basic earnings per share and fully diluted
earnings per share with diluted earnings per share. Management of the Company
does not expect that the adoption of this statement will have a material impact
on the earnings per share calculation.
4. BUSINESS COMBINATIONS
Since the IPO and through December 31, 1996, the Company acquired 18
additional document management businesses, of which 17 were accounted for as
purchases and one was accounted for as a pooling-of-interests.
During the first six months of 1997, the Company acquired six
additional document management businesses, four of which were accounted for as
purchases (the "Purchased Companies") and two of which were accounted for under
the pooling-of-interests method. The four acquisitions accounted for as
purchases were Acadian Consulting, Inc., Computer Central Corporation,
Deliverex of San Francisco and Information Management Corporation. The
aggregate consideration paid for the Purchased Companies consisted of
$4,890,000 in cash and 231,241 shares of Common Stock. The preliminary
allocation of the purchase price is set forth below (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Consideration Paid $8,584
Estimated Fair Value of Tangible Assets 2,774
Estimated Fair Value of Liabilities 2,115
Goodwill 7,925
</TABLE>
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The average fair market value of the shares of Common Stock used in
calculating the consideration paid was $15.98, which represents a 30% to 35%
discount from the average trading price of the Common Stock based on the length
and type of restrictions in the purchase agreements.
The estimated fair market values reflected above are based on
preliminary estimates and assumptions and are subject to revision. In
management's opinion, the preliminary allocations are not expected to be
materially different than the final allocations.
All intangibles are considered enterprise goodwill. Based on the
historical profitability of the purchased companies and trends in the
healthcare, legal, and other industries to outsource document management
functions in the foreseeable future, the enterprise goodwill will be amortized
over a period of 30 years. Management continually evaluates whether events and
circumstances indicate that the remaining estimated useful life of intangible
assets may warrant revisions or that the remaining balance of intangibles or
other long-lived assets may not be recoverable. To make this evaluation,
management uses an estimate of undiscounted net income over the remaining life
of the intangibles or other long-lived assets. The goodwill associated with the
Purchased Companies is not deductible for income tax purposes.
The two acquisitions completed in 1997 accounted for as
poolings-of-interests are MAVRICC and Input. The Company acquired all of the
outstanding stock of MAVRICC and Input in exchange for 1,083,636 shares of
Common Stock. The Company's consolidated financial statements give retroactive
effect to the acquisitions of MAVRICC and Input for all periods presented
herein. The interim results of the Company for the period from January 1, 1996
to June 30, 1996 have been restated for the MAVRICC and Input acquisitions.
Restated total revenue, net income, pro forma net income and weighted average
shares outstanding after giving effect to the MAVRICC and Input acquisitions
are summarized below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
----------------------- -----------------------
As Previously As Previously
As Restated Reported As Restated Reported
----------- -------- ----------- --------
(unaudited, in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenue $ 20,281 $17,063 $32,502 $26,271
Net income 1,182 962 1,651 1,347
Net income per share $ 0.18 $ 0.17 $ 0.25 $ 0.25
Pro forma net income 1,359 968 2,023 1,358
Pro forma net income per share $ 0.20 $ 0.17 $ 0.31 $ 0.25
Weighted average shares outstanding 6,648 5,564 6,564 5,480
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements of the Company and the related notes thereto appearing elsewhere in
this Report on Form 10-Q. Additional information concerning factors that could
cause results to differ materially from those in the forward-looking statements
is contained under "Part II. OTHER INFORMATION Item 5. Other Information."
Introduction
The Company's revenue is classified as service revenue and product and
other revenue. Service revenue relates to the following document management
services: (i) document and data conversion services; (ii) records management
services; (iii) database management and related services; (iv) medical records
release of information services; (v) litigation support services; and (vi)
employee and investor services. Product and other revenue represents sales of
micrographic and business imaging supplies and equipment, primarily in
conjunction with film processing, and other micrographic services and
commissions on the sales of imaging systems and equipment and franchising fees.
Cost of services consists primarily of compensation and benefits to
non-administrative employees, occupancy costs, equipment costs and supplies.
Cost of products sold relates to micrographics and business imaging supplies
and equipment.
Selling, general and administrative expenses ("SG&A") consist
primarily of: (i) compensation and related benefits to the sales and marketing,
executive management, accounting, human resources and other administrative
employees of the Company; (ii) other sales and marketing costs; (iii)
communications costs; (iv) insurance costs; and (v) legal and accounting
professional fees and expenses.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Revenue
Total revenue. Total revenue increased 69.9% from $20.3 million for
the three months ended June 30, 1996 to $34.5 million for the three months
ended June 30, 1997. This increase was comprised of a 77.5% increase in service
revenue and a 1.4% decrease in product and other revenue.
Service revenue. Service revenue increased $14.2 million from $18.3
million for the three months ended June 30, 1996 to $32.5 million for the three
months ended June 30, 1997. This increase was largely due to: (i) the
acquisitions completed subsequent to June 30, 1996 accounted for under the
purchase method of accounting; and (ii) internal growth of 10.8% in service
revenue at the Founding Companies, the Pooled Companies and the companies
acquired and accounted for under the purchase method of accounting consummated
in the first and second quarter of 1996.
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Product and other revenue. Product and other revenue decreased
$27,000 from $2.0 million for the three months ended June 30, 1996 to $1.9
million for the three months ended June 30, 1997. This decrease was primarily
due to decreased sales of micrographic supplies and equipment.
Gross profit
Gross profit increased 71.1% from $6.9 million for the three months
ended June 30, 1996 to $11.9 million for the three months June 30, 1997,
largely due to the increases in revenue discussed above. Gross profit as a
percentage of revenue increased from 34.2% for the three months ended June 30,
1996 to 34.5% for the three months ended June 30, 1997, primarily due to the
higher margin mix of revenue associated with the acquisitions subsequent to the
IPO.
Selling, general and administrative expenses
SG&A increased 51.2% from $4.9 million, or 24.4% of revenue, for the
three months ended June 30, 1996 to $7.5 million, or 21.7% of revenue, for the
three months ended June 30, 1997, primarily due to SG&A associated with the
acquisitions completed since the first quarter of 1996. After giving effect to
the Compensation Differential in the three months ended June 30, 1996, SG&A
increased 63.7% from $4.6 million, or 22.5% of revenue, to $7.5 million, or
21.7% of revenue. This decrease as a percentage of revenue was a result of:
(i) a decrease in SG&A as a percentage of revenue at the Founding Companies and
Pooled Companies from 20.6% for the three months ended June 30, 1996 to 19.1%
for the three months ended June 30, 1997, primarily due to spreading the
companies' fixed cost over a larger revenue base; and (ii) lower average SG&A
as a percentage of revenue associated with the acquisitions subsequent to the
IPO relative to the Founding Companies and Pooled Companies. These reductions
were offset by increased corporate overhead required to manage the consolidated
group of companies.
Pro forma operating income
Pro forma operating income adjusted for the Compensation Differential
for the three months ended June 30, 1996 increased 71.5% from $2.3 million, or
11.4% of revenue, for the three months ended June 30, 1996 to $4.0 million, or
11.5% of revenue, for the three months ended June 30, 1997.
Pro forma income before income taxes and pro forma net income
Pro forma income before income taxes adjusted for the Compensation
Differential for the three months ended June 30, 1996 increased 73.8% from $2.3
million for the three months ended June 30, 1996 to $4.0 million for the three
months ended June 30, 1997, and pro forma net income adjusted for the
Compensation Differential and pro forma provision for taxes for the three
months ended June 30, 1996 increased 68.7% from $1.4 million for the three
months ended June 30, 1996 to $2.3 million for the three months ended June 30,
1997, largely attributable to the factors discussed above. Net income for the
three months ended June 30, 1997 was impacted by a higher effective tax rate
attributable to the impact of nondeductible goodwill associated with certain of
the acquisitions subsequent to the IPO.
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SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenue
Total revenue. Total revenue increased 104.8% from $32.5 million for
the six months ended June 30, 1996 to $66.6 million for the six months ended
June 30, 1997. This increase was comprised of a 113.0% increase in service
revenue and a 25.8% increase in product and other revenue.
Service revenue. Service revenue increased $33.3 million from $29.5
million for the six months ended June 30, 1996 to $62.8 million for the six
months ended June 30, 1997. This increase was largely due to: (i) the
acquisitions completed subsequent to the IPO accounted for under the purchase
method of accounting; and (ii) internal growth of 12.2% in service revenue at
the Founding Companies, the Pooled Companies and companies acquired and
accounted for under the purchase method of accounting consummated in the first
and second quarter of 1996.
Product and other revenue. Product and other revenue increased
$782,000 from $3.0 million for the six months ended June 30, 1996 to $3.8
million for the six months ended June 30, 1997. This increase was primarily due
to increased product revenue associated with the purchase of B&B Information
and Image Management, Inc. in May 1996.
Gross profit
Gross profit increased 106.0% from $11.0 million for the six months
ended June 30, 1996 to $22.7 million for the six months June 30, 1997, largely
due to the increases in revenue discussed above. Gross profit as a percentage
of revenue increased from 33.9% for the six months ended June 30, 1996 to 34.1%
for the six months ended June 30, 1997, primarily due to the higher margin mix
of revenue associated with the acquisitions subsequent to the IPO.
Selling, general and administrative expenses
SG&A increased 74.4% from $8.4 million, or 25.7% of revenue, for the
six months ended June 30, 1996 to $14.6 million, or 21.9% of revenue, for the
six months ended June 30, 1997, primarily due to SG&A associated with the
acquisitions completed since the IPO. After giving effect to the Compensation
Differential in each period, SG&A increased 87.8% from $7.7 million, or 23.6%
of revenue, for the six months ended June 30, 1996 to $14.4 million, or 21.6%
of revenue, for the six months ended June 30, 1997. This decrease as a
percentage of revenue was a result of: (i) a decrease in SG&A as a percentage
of revenue at the Founding Companies and Pooled Companies from 20.8% for the
six months ended June 30, 1996 to 19.4% for the six months ended June 30, 1997,
primarily due to spreading the companies' fixed cost over a larger revenue
base; and (ii) lower average SG&A as a percentage of revenue associated with
the acquisitions subsequent to the IPO relative to the Founding Companies and
Pooled Companies. These reductions were offset by increased corporate overhead
required to manage the consolidated group of companies and deal costs related
to the acquisition of the Pooled Companies.
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Pro forma operating income
Pro forma operating income adjusted for the Compensation Differential
increased 127.0% from $3.3 million, or 10.2% of revenue, for the six months
ended June 30, 1996 to $7.5 million, or 11.3% of revenue, for the six months
ended June 30, 1997.
Pro forma income before income taxes and pro forma net income
Pro forma income before income taxes adjusted for the Compensation
Differential increased 122.3% from $3.4 million for the six months ended June
30, 1996 to $7.5 million for the six months ended June 30, 1997, and pro forma
net income adjusted for the Compensation Differential and pro forma provision
for taxes increased 117.2% from $2.0 million for the six months ended June 30,
1996 to $4.4 million for the six months ended June 30, 1997, largely
attributable to the factors discussed above. Net income for the six months
ended June 30, 1997 was impacted by a higher effective tax rate attributable to
the impact of nondeductible goodwill associated with certain of the
acquisitions subsequent to the IPO.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had $21.6 million of working capital
and $7.9 million of cash. Cash used in operating activities for the six months
ended June 30, 1997 was $1.7 million. Net cash used in operating activities
for the six months ended June 30, 1997 was impacted by: (i) an increase in
accounts receivable related to the Company's growth in revenue; and (ii) a
reduction in accounts payable and accrued liabilities primarily due to the
payment of 1996 Federal and State income and franchise taxes. Cash used for
investing activities was $10.1 million, as the Company paid $7.8 million for
acquisitions, net of cash acquired. Cash used for financing activities was
$1.7 million.
During the six months ended June 30, 1996, cash flows provided by
operating activities were $3.1 million. Cash used for investing activities was
$21.9 million, as the Company paid $20.7 million for acquisitions, net of cash
acquired. Cash provided by financing activities was $22.1 million primarily
due to the Company's IPO in January 1996.
The Company raised $43.6 million in a public stock offering in
December 1996 (the "December Offering"). The Company repaid its outstanding
borrowings on its credit facility (the "Line of Credit") of $22.8 million, and
assumed and repaid $2.1 million of debt for acquisitions subsequent to the
December Offering. The Company has used $11.1 million in acquisitions since
the December Offering and $3.4 million as working capital. As of June 30,
1997, cash and cash equivalents included $4.2 million remaining from the
proceeds of the December Offering.
The Company anticipates that cash on hand, cash from operations,
additional bank financing available under the Line of Credit and shares of
Common Stock available under the Acquisition Shelf (as defined below) will
provide sufficient liquidity to execute the Company's acquisition and internal
growth plans for approximately the next 12 months. The availability under the
Line of Credit as of June 30, 1997 was $5.0 million for working capital and
general corporate purposes, and approximately $8.8 million for acquisitions.
Should the Company accelerate its acquisition program, the Company may need to
seek additional financing through the public or
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private sale of equity or debt securities. There can be no assurance that the
Company could secure such financing if and when it is needed or on terms the
Company deems acceptable. The Company has filed an acquisition shelf
Registration Statement on Form S-4 (Registration No. 333-24015) registering
2,500,000 shares of Common Stock for issuance in its acquisition program (the
"Acquisition Shelf"), of which 2,383,333 shares were available at June 30,
1997. The Company expects to renegotiate the Line of Credit in the near future
in order to increase its flexibility in executing its acquisition strategy.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the General Instructions to Rule 304 of Regulation S-K,
the quantitative and qualitative disclosures called for by Item 3 and by Rule
305 of Regulation S-K are inapplicable to the Company at this time.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 15, 1997, the Company held its annual meeting of stockholders
and the stockholders elected eleven (11) directors. The shares voting on the
director nominees were cast as follows:
<TABLE>
Number of Votes
-------------------------------
Nominee For Against/Withheld Abstentions Broker Non-Votes
------- --- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
G. Michael Bellenghi 7,807,782 2,695 -- --
Ed H. Bowman, Jr. 7,807,782 2,695 -- --
Michael J. Bradley 7,807,782 2,695 -- --
Kyle C. Kerbawy 7,807,782 2,695 -- --
Jerry F. Leonard 7,807,782 2,695 -- --
David Lowenstein 7,807,782 2,695 -- --
Gregory R. Melanson 7,807,782 2,695 -- --
Donald F. Moorehead, Jr. 7,807,782 2,695 -- --
Hon. Edward M. Rowell 7,807,782 2,695 -- --
Jonathan B. Shaw 7,807,782 2,695 -- --
Thomas C. Walker 7,807,782 2,695 -- --
</TABLE>
ITEM 5. OTHER INFORMATION.
RECENT DEVELOPMENTS
Acquisition Activity. The Company has acquired a total of 32
companies. Since the end of the second quarter, the Company has acquired all
of the outstanding shares of Major Legal Services, a litigation support
business based in San Francisco, California.
Officers. In June 1997, the Company announced the appointment of Joe
A. Rose as Senior Vice President.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This filing contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended, which are intended to be covered by the safe
harbors created thereby. Investors are cautioned that all forward-looking
statements involve risks and uncertainties, including without limitation, the
sufficiency of the Company's working capital and the ability of the Company to
realize benefits from consolidating certain general and administrative
functions, to continue its aggressive acquisition program, to retain
management, to implement its focused business strategy to expand its document
management services geographically, to retain customers and attract customers
from other businesses, to increase revenue by cross-selling services and to
successfully defend itself in ongoing and future litigation. Although the
Company believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be
II-1
<PAGE> 16
inaccurate, and, therefore, there can be no assurance that the forward-looking
statements included in this filing will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.2 Amended and Restated By-Laws of F.Y.I. Incorporated
10.29 Employment Agreement between F.Y.I. Incorporated and Joe A. Rose
21 List of subsidiaries of F.Y.I. Incorporated
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K with the Commission on
April 9, 1997, reporting under Items 2, 5 and 7 thereto the acquisitions by the
Company of MAVRICC Management Systems, Inc., MMS Escrow and Transfer Agency,
Inc., and Input of Texas, Inc. No financial statements were filed.
II-2
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized.
F.Y.I. Incorporated
Date: August 8, 1997 By: /s/ Ed H. Bowman, Jr.
----------------------------
Ed H. Bowman, Jr.
Chief Executive Officer
Date: August 8, 1997 By: /s/ David Lowenstein
----------------------------
David Lowenstein
Chief Financial Officer
(Principal Financial Officer)
Date: August 8, 1997 By: /s/ Timothy J. Barker
----------------------------
Timothy J. Barker
Chief Accounting Officer
(Principal Accounting Officer)
II-3
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.2 Amended and Restated By-Laws of F.Y.I. Incorporated
10.29 Employment Agreement between F.Y.I. Incorporated and Joe A.
Rose
21 List of subsidiaries of F.Y.I. Incorporated
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
F.Y.I. INCORPORATED
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the Board of
Directors, for the purpose of electing Directors and for the transaction of
such other business as may be properly brought before the meeting.
SECTION 2. Special Meetings. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman
of the Board or the President and shall be called by the President or the
Secretary at the request in writing of stockholders holding together at least
twenty-five percent of the number of shares of stock outstanding and entitled
to vote at such meeting. Any special meeting of the stockholders shall be held
on such date, at such time and at such place within or without the State of
Delaware as the Board of Directors or the officer calling the meeting may
designate. At a special meeting of the stockholders, no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting unless all of the stockholders are present in person or
by proxy, in which case any and all business may be transacted at the meeting
even though the meeting is held without notice.
SECTION 3. Notice of Meetings. Except as otherwise provided in these
By-Laws or by law, a written notice of each meeting of the stockholders shall
be given not less than ten (10) nor more than sixty (60) days before the date
of the meeting to each stockholder of the Corporation entitled to vote at such
meeting at his address as it appears on the records of the Corporation. The
notice shall state the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the meeting is called.
SECTION 4. Quorum. At any meeting of the stockholders, the holders
of a majority in number of the total outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by proxy, shall constitute a quorum of the stockholders for all purposes,
unless the representation of a larger number of shares shall be required by
law, by the Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a
quorum for purposes of such class vote unless the representation of a larger
number of shares of such class shall be required by law, by the Certificate of
Incorporation or by these By-Laws.
<PAGE> 2
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be
present in person or represented at any meeting of the stockholders, the
holders of a majority in number of the shares of stock of the Corporation
present in person or represented by proxy and entitled to vote at such meeting
may adjourn from time to time; provided, however, that if the holders of any
class of stock of the Corporation are entitled to vote separately as a class
upon any matter at such meeting, any adjournment of the meeting in respect of
action of such class upon such matter shall be determined by the holders of a
majority of the shares of such class present in person or represented by proxy
and entitled to vote at such meeting. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the stockholders, or the holder of any class
of stock entitled to vote separately as a class, as the case may be, may
transact any business which might have been transacted by them at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting.
SECTION 6. Organization. The Chairman, the President or, in their
absence, any Vice President shall call all meetings of the stockholders to
order, and shall act as Chairman of such meetings. In the absence of the
President and all of the Vice Presidents, the holders of a majority in number
of the shares of stock of the Corporation present in person or represented by
proxy and entitled to vote at such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders; but in the absence of the Secretary, the Chairman
may appoint any person to act as Secretary of the meeting. It shall be the
duty of the Secretary to prepare and make, at least ten days before every
meeting of stockholders, a complete list of stockholders entitled to vote at
such meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of share registered in the name of each stockholder.
Such list shall be open, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held, for the ten
days next preceding the meeting, to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, and shall be
produced and kept at the time and place of the meeting during the whole time
thereof and subject to the inspection of any stockholder who may be present.
SECTION 7. Voting. Except as otherwise provided in the Certificate
of Incorporation or by law, each stockholder shall be entitled to one vote for
each share of the capital stock of the Corporation registered in the name of
such stockholder upon the books of the Corporation. Each stockholder entitled
to vote at a meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
When directed by the presiding officer or upon the demand of any stockholder,
the vote upon any matter before a meeting of stockholders shall be by ballot.
Except as otherwise provided by law or by the Certificate of Incorporation,
Directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the stockholders entitled to vote in the election and, whenever
any corporate action, other than the election of
<PAGE> 3
Directors is to be taken, it shall be authorized by a majority of the votes
cast at a meeting of stockholders by the stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes.
SECTION 8. Inspectors. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided at any meeting of the stockholders by one
or more Inspectors who may be appointed by the Board of Directors before the
meeting, or if not so appointed, shall be appointed by the presiding officer at
the meeting. If any person so appointed fails to appear or act, the vacancy
may be filled by appointment in like manner.
SECTION 9. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required to
be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of any such corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE II
Board of Directors
SECTION 1. Number and Term of Office. The business and affairs of
the Corporation shall be managed by or under the direction of a Board of
Directors, none of whom need be stockholders of the Corporation. The number of
Directors constituting the Board of Directors shall be fixed from time to time
by resolution passed by a majority of the Board of Directors. The Director
shall, except as hereinafter otherwise provided for filling vacancies, be
elected at the annual meeting of stockholders, and shall hold office until
their respective successors are elected and qualified or until their earlier
resignation or removal.
SECTION 2. Removal, Vacancies and Additional Directors. The
stockholders may, at any special meeting the notice of which shall state that
it is called for that purpose, remove, with or without cause, any Director and
fill the vacancy; provided that whenever any Director shall have been elected
by the holders of any class of stock of the Corporation voting separately as a
class under the provisions of the Certificate of Incorporation, such Director
may be removed and the vacancy filled only by the holders of that class of
stock voting separately as a class. Vacancies caused by any such removal and
not filled by the stockholders at the meeting at which such removal shall have
been made, or any vacancy caused by the death or resignation of any Director or
for any other reason, and any newly created directorship resulting from any
increase
<PAGE> 4
in the authorized number of Directors, may be filled by the affirmative vote of
a majority of the Directors then in office, although less than a quorum, and
any Director so elected to fill any such vacancy or newly created directorship
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal.
When one or more Directors shall resign effective at a future date, a
majority of the Directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
Director so chosen shall hold office as herein provided in connection with the
filling of other vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the State
of Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to time
by resolution shall determine. No notice shall be required for any regular
meeting of the Board of Directors; but a copy of every resolution fixing or
changing the time or place of regular meetings shall be mailed to every
Director at least five days before the first meeting held in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by direction of the President, the
Chairman of the Board or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special meeting
shall be given by mailing the same at least two days before the meeting or by
causing the same to be transmitted by telegraph, cable or wireless at least one
day before the meeting to each Director. Unless otherwise indicated in the
notice thereof, any and all business other than an amendment of these By-Laws
may be transacted at any special meeting, and an amendment of these By-Laws may
be acted upon if the notice of the meeting shall have stated that the amendment
of these By-Laws is one of the purposes of the meeting. At any meeting at
which every Director shall be present, even though without any notice, any
business may be transacted, including the amendment of these By-Laws.
SECTION 6. Quorum. Subject to the provisions of Section 2 of this
Article II, a majority of the members of the Board of Directors in office (but
in no case less than one-third of the total number of Directors nor less than
two Directors) shall constitute a quorum for the transaction of business and
the vote of the majority of the Directors present at any meeting of the Board
of Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum present,
a majority of those present may adjourn the meeting from time to time.
SECTION 7. Organization. The Chairman of the Board shall preside at
all meetings of the Board of Directors. In the absence of the Chairman, an
acting Chairman shall be elected from the Directors present to preside at such
meeting. The Secretary of the Corporation shall act
<PAGE> 5
as Secretary of all meetings of the Directors; but in the absence of the
Secretary, the Chairman may appoint any person to act as Secretary of the
meeting.
SECTION 8. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation. The
Board may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence of disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided by resolution passed by a majority of the whole Board, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to
amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending these By-Laws; and unless such resolution, these
By-Laws, or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise
restricted by the Certificate of Incorporation or by these By-Laws, the members
of the Board of Directors or any committee designated by the Board, may
participate in a meeting of the Board of such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
SECTION 10. Consent of Directors or Committee in Lieu of Meeting.
Unless otherwise restricted by the Certificate of Incorporation or by these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors, or any committee thereof, may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings
of the Board or committee, as the case may be.
ARTICLE III
Officers
SECTION 1. Officers. The officers of the Corporation may be a
President, one or more Vice Presidents, a Secretary and a Treasurer, and such
additional officers, if any, as shall be elected by the Board of directors
pursuant to the provisions of Section 6 of this Article III. The President,
one or more Vice Presidents, the Secretary and the Treasurer shall be elected
by the Board of Directors at its first meeting after each annual meeting of the
stockholders. The failure to hold such election shall not of itself terminate
the term of office of any officer. All officers shall hold office at the
pleasure of the Board of Directors. Any officer may resign at any time
<PAGE> 6
upon written notice to the Corporation. Officers may, but need not, be
Directors. Any number of offices may be held by the same person.
All officers, agents and employees shall be subject to removal, with
or without cause, at any time by the Board of Directors. The removal of an
officer without cause shall be without prejudice to his contract rights, if
any. The election or appointment of an officer shall not of itself create
contract rights. All agents and employees other than officers elected by the
Board of Directors shall also be subject to removal, with or without cause, at
any time by the officers appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the
Corporation as set forth in these By-Laws, the officers shall have such
authority and shall perform such duties as from time to time may be determined
by the Board of Directors.
SECTION 2. Powers and Duties of the President. The President shall
be the chief executive officer of the Corporation and, subject to the control
of the Board of Directors, shall have general charge and control of all its
business and affairs and shall have all powers and shall perform all duties
incident to the office of President. He shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors and shall have such
other powers and perform such other duties as may from time to time be assigned
to him by these By-Laws or by the Board of Directors.
SECTION 3. Powers and Duties of the Vice Presidents. Each Vice
President shall have all powers and shall perform all duties incident to the
office of Vice President and shall have such other powers and perform such
other duties as may from time to time be assigned to him by these By-Laws or by
the Board of Directors or the President.
SECTION 4. Powers and Duties of the Secretary. The Secretary shall
keep the minutes of all meetings of the Board of Directors and the minutes of
all meetings of the stockholders in books provided for that purpose; he shall
attend to the giving or serving of all notices of the Corporation; he shall
have custody of the corporate seal of the Corporation and shall affix the same
to such documents and other papers as the Board of Directors or the President
shall authorize and direct; he shall have charge of the stock certificate
books, transfer books and stock ledgers and such other books and papers as the
Board of Directors or the President shall direct, all of which shall at all
reasonable times be open to the examination of any Director, upon application,
at the office of the Corporation during business hours; and he shall have all
powers and shall perform all duties incident to the office of Secretary and
shall also have such other powers and shall perform such other duties as may
from time to time be assigned to him by these By-Laws or by the Board of
Directors or the President.
SECTION 5. Powers and Duties of the Treasurer. The Treasurer shall
have custody of, and when proper shall pay out, disburse or otherwise dispose
of, all funds and securities of the Corporation which may have come into his
hands; he may endorse on behalf of the Corporation
<PAGE> 7
for collection checks, notes and other obligations and shall deposit the same
to the credit of the Corporation in such bank or banks or depositary or
depositaries as the Board of Directors may designate; he shall sign all
receipts and vouchers for payments made to the Corporation; he shall enter or
cause to be entered regularly in the books of the Corporation kept for the
purpose full and accurate accounts of all moneys received or paid or otherwise
disposed of by him and whenever required by the Board of Directors or the
President shall render statements of such accounts; he shall, at all reasonable
times, exhibit his books and accounts to any Director of the Corporation upon
application at the office of the Corporation during business hours; and he
shall have all powers and shall perform all duties incident of the office of
Treasurer and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him by these By-Laws or by the
Board of directors or the President.
SECTION 6. Additional Officers. The Board of Directors may from time
to time elect such other officers (who may but need not be Directors),
including a Controller, Assistant Treasurers, Assistant Secretaries and
Assistant Controllers, as the Board may deem advisable and such officers shall
have such authority and shall perform such duties as may from time to time be
assigned to them by the Board of Directors or the President.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
SECTION 7. Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish
bonds to the Corporation for the faithful performance of their duties, in such
penalties and with such conditions and security as the Board shall require.
SECTION 8. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the President or any Vice President shall have full power and
authority on behalf of the Corporation to attend and to act and to vote, or in
the name of the Corporation to execute proxies to vote, at any meeting of
stockholders of any corporation in which the Corporation may hold stock, and at
any such meeting shall possess and may exercise, in person or by proxy, any and
all rights, powers and privileges incident to the ownership of such stock. The
Board of Directors may from time to time, by resolution, confer like powers
upon any other person or persons.
SECTION 9. Compensation of Officers. The officers of the Corporation
shall be entitled to receive such compensation for their services as shall from
time to time be determined by the Board of Directors.
ARTICLE IV
Indemnification of Directors and Officers
SECTION 1. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a Director or officer of the Corporation, or is or
<PAGE> 8
was serving or has agreed to serve at the request to the Corporation as a
Director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation, as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid settlement
actually and reasonably incurred by him or on his behalf in connection with
such action, suit or proceeding and any appeal therefrom, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful, except
that in the case of an action or suit by or in the right of the Corporation to
procure a judgment in its favor (1) such indemnification shall be limited to
expenses (including attorneys' fees) actually and reasonably incurred by such
person in the defense or settlement of such action or suit, and (2) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. Successful Defense. To the extent that a Director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Section 1 of this Article IV or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
SECTION 3. Determination that Indemnification is Proper. Any
indemnification of a Director or officer of the Corporation under Section 1 of
this Article IV (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the Director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the Corporation under Section 1 (unless ordered by a court) may be
made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1. Any such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such actions, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
<PAGE> 9
SECTION 4. Advance Payment of Expenses. Unless the Board of
Directors otherwise determines in a specific case, expenses incurred by a
Director or officer in defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
the Director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IV. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate. The Board of Directors may authorize the
Corporation's legal counsel to represent such Director, officer, employee or
agent in any action, suit or proceeding, whether or not the Corporation is a
party to such action, suit or proceeding.
SECTION 5. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a contract right may not
be modified retroactively without the consent of such Director, officer,
employee or agent.
The indemnification provided by this Article IV shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent shall inure to the
benefit of the heirs, executors and administrators of such a person. The
corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys fees, that may change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article IV.
SECTION 6. Severability. If this Article IV or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorney's fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by applicable law.
SECTION 7. Subrogation. In the event of payment of indemnification
to a person described in Section 1 of this Article IV, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the Corporation
may deem necessary or desirable to perfect such right of recovery, including
the execution of such documents necessary to enable the Corporation effectively
to enforce any such recovery.
<PAGE> 10
SECTION 8. No Duplication of Payments. The Corporation shall not be
liable under this Article IV to make any payments in connection with any claim
made against a person described in Section 1 of this Article IV to the extent
such person has otherwise received payment (under any insurance policy, by-law
or otherwise) of the amounts otherwise indemnifiable hereunder.
ARTICLE V
Stock-Seal-Fiscal Year
SECTION 1. Certificates for Shares of Stock. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent with
the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered
as the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person
owning a certificate for shares of stock of the Corporation alleges that it has
been lost, stolen or destroyed, he shall file in the office of the Corporation
an affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause
to be issued to such person a new certificate in replacement for the
certificate alleged to have been lost, stolen or destroyed. Upon the stub of
every new certificate so issued shall be noted the fact of such issue and the
number, date and the name of the registered owner of the lost, stolen or
destroyed certificate in lieu of which the new certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the Corporation
shall be transferred on the books of the Corporation by the holder thereof, in
person or by his attorney duly
<PAGE> 11
authorized in writing, upon surrender and cancellation of certificates for the
number of shares of stock to be transferred, except as provided in Section 2 of
this Article IV.
SECTION 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, as the case may be, the Board of Directors may fix, in
advance, a record date, which shall not be (i) more than sixty (60) nor less
than ten (10) days before the date of such meeting, or (ii) in the case of
corporate action to be taken by consent in writing without a meeting, prior to,
or more than ten (10) days after, the date upon which the resolution fixing the
record date is adopted by the Board of Directors, or (iii) more than sixty (60)
days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is delivered to
the Corporation; and the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 6. Dividends. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be
used by any officer of the Corporation designated by the Board of Directors or
the President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be
such fiscal year as the Board of Directors from time to time by resolution
shall determine.
<PAGE> 12
ARTICLE VI
Miscellaneous Provisions.
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of
exchange, acceptances, notes or other obligations or orders for the payment of
money shall be signed and, if so required by the Board of Directors,
countersigned by such officers of the Corporation and/or other persons as the
Board of Directors from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depository
by the Treasurer and/or such other officers or persons as the Board of
Directors from time to time may designate.
SECTION 2. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized to do so, any officer or agent of the Corporation
may effect loans and advances for the Corporation from any bank, trust company
or other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or
confined to specific instances.
SECTION 3. Contracts. Except as otherwise provided in these By-Laws
or by law or as otherwise directed by the Board of Directors, the President or
any Vice President shall be authorized to execute and deliver, in the name and
on behalf of the Corporation, all agreements, bonds, contracts, deeds,
mortgages, and other instruments, either for the Corporation's own account or
in a fiduciary or other capacity, and the seal of the Corporation, if
appropriate, shall be affixed thereto by any of such officers or the Secretary
or an Assistant Secretary. The Board of Directors, the President or any Vice
President designated by the Board of Directors may authorize any other officer,
employee or agent to execute and deliver, in the name and on behalf of the
Corporation, agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and, if appropriate, to affix the seal of the Corporation
thereto. The grant of such authority by the Board or any such officer may be
general or confined to specific instances.
SECTION 4. Waivers of Notice. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these
By-Laws to any person or persons, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 5. Officers Outside of Delaware. Except as otherwise
required by the laws of the State of Delaware, the Corporation may have an
office or offices and keep its books, documents and papers outside of the State
of Delaware at such place or places as from time to time may be determined by
the Board of Directors or the President.
<PAGE> 13
ARTICLE VII
Amendments
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of the
members of the Board, provided in the case of any special meeting at which all
of the members of the Board are not present, that the notice of such meeting
shall have stated that the amendment of these By-Laws was one of the purposes
of the meeting; but these By-Laws and any amendment thereof may be altered,
amended or repealed or new By-Laws may be adopted by the holders of a majority
of the total outstanding stock of the Corporation entitled to vote at any
annual meeting or at any special meeting, provided, in the case of any special
meeting, that notice of such proposed alteration, amendment, repeal or adoption
is included in the notice of the meeting.
<PAGE> 1
Exhibit 10.29
EMPLOYMENT AGREEMENT
(JOE A. ROSE)
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
the 17th day of June, 1997 by and between Joe A. Rose ("Employee") and F.Y.I.
Incorporated, a Delaware corporation (the "Company"). This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
between the Company and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in
the document management services business (the "Business").
Employee is employed hereunder by the Company in a confidential
relationship wherein Employee, in the course of his employment with the
Company, has and will continue to become familiar with and aware of information
as to the Company's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company, and future
plans with respect thereto, all of which has been and will be established and
maintained at great expense to the Company; this information is a trade secret
and constitutes the valuable goodwill of the Company.
Therefore, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby
agreed as follows:
A G R E E M E N T S
1. Employment and Duties.
(a) The Company hereby employs Employee as a Senior Vice
President. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a Senior Vice President and will report
directly to the President of the Company. Employee hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(b), agrees to devote his working time, attention and efforts to
promote and further the business of the Company.
(b) Employee shall not, during the term of his employment
hereunder, be engaged in any other business activity pursued for gain, profit
or other pecuniary advantage except to the extent that such activity does not
interfere with Employee's duties and responsibilities hereunder. The foregoing
limitations shall not be construed as prohibiting Employee from making personal
<PAGE> 2
investments in such form or manner as will neither require his services in the
operation or affairs of the companies or enterprises in which such investments
are made.
2. Compensation. For all services rendered by Employee, the
Company shall compensate Employee as follows:
(a) Base Salary; Annual Bonus. The base salary payable to
Employee shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly
(pro-rated for any year in which Employee is employed for less than the full
year). For 1997 and subsequent years, it is the Company's intent to develop a
written Incentive Bonus Plan setting forth the criteria under which Employee
and other officers and key employees will be eligible to receive year-end bonus
awards. Employee shall be eligible for a bonus opportunity of up to 50% of
Employee's annual base salary in accordance with this Incentive Bonus Plan,
pro-rated for any year in which Employee was employed for less than the full
year. The award of any bonus shall be based on the total performance of the
business unit managed and shall be payable in various increments based on the
performance of the business unit versus targeted goals. The incremental
payments and the Company's targeted performance shall be determined by the
Board of Directors (the "Board") or the compensation committee thereof.
(b) Other Compensation. Employee shall be entitled to receive
additional benefits and compensation from the Company in such form and to such
extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental and other insurance plans that the Company may have
in effect from time to time.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of his services pursuant to this Agreement and a $500 per
month car allowance (determined on a pre-tax basis). All reimbursable
expenses shall be appropriately documented in reasonable detail by
Employee upon submission of any request for reimbursement, and in a
format and manner consistent with the Company's expense reporting
policy.
(iii) Four (4) weeks paid vacation for each year during the
period of employment or such greater amount as may be afforded
officers and key employees generally under the Company's policies in
effect from time to time (pro-rated for any year in which Employee is
employed for less than the full year).
(iv) The Company shall provide Employee with other
executive perquisites as may be available to or deemed appropriate for
Employee by the Board and participation in all other Company-wide
employee benefits as available from time to time, which may include
participation in the Company's 1996 Long-Term Incentive Compensation
Plan.
(v) Employee shall be granted options (the "Options") to
acquire 65,000 shares of Common Stock at the fair market value on the
date hereof. The Options shall become exercisable as to 40% of the
underlying shares one year following the date hereof
<PAGE> 3
and as to the remainder, 20% of the underlying shares of Common Stock
on each of the next three (3) anniversaries of the date hereof. The
Options shall expire on the tenth anniversary of the date of grant.
(vi) The Company shall pay Employee a lump sum payment not
to exceed $30,000 to cover Employee's relocation expenses, upon
completing the relocation. If the employee leaves the Company,
voluntarily, prior to two years from the date of this Agreement,
employee shall reimburse the Company for 100% of the relocation
payment.
3. Place of Performance.
(a) Employee understands that he may be requested by the Board of
Directors of the Company (the "Board") to relocate from his then current
residence to another geographic location in order to more efficiently carry out
his duties and responsibilities under this Agreement or as part of a promotion
or other increase in duties and responsibilities. In such event, if Employee
agrees to relocate, the Company will pay relocation costs up to $30,000 to move
Employee, his immediate family and their personal property and effects. Such
costs may include, by way of example, but are not limited to, pre-move visits
to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; and closing costs on the sale of
Employee's present residence and on the purchase of a comparable residence in
the new location. The general intent of the foregoing is to assist Employee
with the cost of the relocation, with an understanding that Employee will use
his best efforts to incur only those costs which are reasonable and necessary
to effect a smooth, efficient and orderly relocation with minimal disruption to
the business affairs of the Company and the personal life of Employee and his
family.
(b) Notwithstanding the above, if Employee is requested by the
Board to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 4(c).
4. Term; Termination; Rights on Termination. The term of this
Agreement shall begin on the date hereof and continue for one (1) year (the
"Term"). This Agreement and Employee's employment may be terminated in any one
of the following ways:
(a) Death. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
(b) Disability. The Company will make efforts to reasonably
accommodate Employee as required by applicable state or federal disability
laws. However, the parties irrebutably presume that, given Employee's
position, it would be an undue hardship to the Company if Employee is absent
for more than three (3) consecutive months. Therefore, if as a result of
incapacity due to physical or mental illness or injury, Employee shall have
been absent from his full-time duties hereunder for three (3) consecutive
months, then thirty (30) days after receiving written notice (which notice may
occur before or after the end of such three (3) month period, but which shall
not be effective earlier than the last day of such three (3) month period), the
Company may terminate Employee's employment hereunder provided Employee is
unable to
<PAGE> 4
resume his full-time duties at the conclusion of such notice period. Also,
Employee may terminate his employment hereunder if his health should become
impaired to an extent that makes the continued performance of his duties
hereunder hazardous to his physical or mental health or his life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Term of this Agreement or for six
(6) months, whichever amount is greater.
(c) Good Cause. The Company may terminate the Agreement five (5)
days after written notice to Employee for good cause, which shall be: (i)
Employee's breach of this Agreement; (ii) Employee's negligence in the
performance or nonperformance (continuing for five (5) days after receipt of
the written notice) of any of Employee's material duties and responsibilities
hereunder; (iii) Employee's dishonesty, fraud or misconduct with respect to the
business or affairs of the Company that adversely affects the operations or
reputation of the Company; (iv) Employee's conviction of a felony crime; or (v)
chronic alcohol abuse or illegal drug abuse by Employee. In the event of a
termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of
employment, the Company may, without cause, terminate this Agreement and
Employee's employment, effective ten (10) days after written notice is provided
to Employee. Employee may only be terminated without cause by the Company
during the Term hereof if such termination is approved by the Board of
Directors of the Company. Should Employee be terminated by the Company without
cause, Employee shall receive from the Company, in a lump-sum payment due on
the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
six (6) months, whichever amount is greater.
(e) Termination by Employee for Good Reason. Employee may
terminate his employment hereunder for "Good Reason." As used herein, "Good
Reason" shall mean the continuance of any of the following after fifteen (15)
days' prior written notice by Employee to the Company, specifying the basis for
such Employee's having Good Reason to terminate this Agreement:
(i) Employee's removal from, or failure to be reappointed
or reelected to, Employee's position under this Agreement, except as
contemplated by paragraphs 4(a), (b) and (c); or
(ii) Any other material breach of this Agreement by the
Company, including the failure to pay Employee on a timely basis the
amounts to which he is entitled under this Agreement.
<PAGE> 5
In the event of any dispute with respect to the termination by the Employee for
Good Reason, such dispute shall be resolved pursuant to the provisions of
paragraph 16 below. In the event that it is determined that Good Reason did
exist, the Company shall pay all amounts and damages to which Employee may be
entitled as a result of such breach, including interest thereon and all
reasonable legal fees and expenses and other costs incurred by Employee to
enforce his rights hereunder. Should Employee terminate his employment for
Good Reason, Employee shall receive from the Company, in a lump-sum payment due
on the effective date of termination, the base salary at the rate then in
effect for whatever time period is remaining under the Term of this Agreement
or for six (6) months, whichever amount is greater.
(f) Termination by Employee Without Cause. If Employee resigns
or otherwise terminates his employment without Good Reason pursuant to
paragraph 4(e), Employee shall receive no severance compensation.
Upon termination of this Agreement for any reason provided in clauses (a)
through (f) above, Employee shall be entitled to receive all compensation
earned and all benefits and reimbursements vested or due through the effective
date of termination. Additional compensation subsequent to termination, if
any, will be due and payable to Employee only to the extent and in the manner
expressly provided above or in paragraph 16. All other rights and obligations
of the Company and Employee under this Agreement shall cease as of the
effective date of termination, except that the Company's obligations under
paragraph 10 herein and Employee's obligations under paragraphs 5, 6, 7, 10 and
11 herein shall survive such termination in accordance with their terms.
5. Return of Company Property. All records, designs, patents,
business plans, financial statements, manuals, memoranda, lists and other
property delivered to or compiled by Employee by or on behalf of the Company or
their representatives, vendors or customers which pertain to the business of
the Company shall be and remain the property of the Company, as the case may
be, and be subject at all times to their discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of the
Company that is collected by Employee shall be delivered promptly to the
Company without request by it upon termination of Employee's employment.
6. Inventions. Employee shall disclose promptly to the Company
any and all significant conceptions and ideas for inventions, improvements and
valuable discoveries, whether patentable or not, which are conceived or made by
Employee, solely or jointly with another, during the period of employment or
within one (1) year thereafter, and which are directly related to the business
or activities of the Company and that Employee conceives as a result of his
employment by the Company. Employee hereby assigns and agrees to assign all
his interests therein to the Company or its nominee. Whenever requested to do
so by the Company, Employee shall execute any and all applications, assignments
or other instruments that the Company shall deem necessary to apply for and
obtain letters patent of the United States or any foreign country or to
otherwise protect the Company's interest therein.
7. Trade Secrets. Employee agrees that he will not, during or
after the term of this Agreement with the Company, disclose the specific terms
of the Company's relationships or
<PAGE> 6
agreements with their respective significant vendors or customers or any other
significant and material trade secret of the Company, whether in existence or
proposed, to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever.
8. Disclosure of Information. Employee agrees that for a period
of three (3) years after the date hereof or during the term of this Agreement
and for a period of three (3) years thereafter, whichever is longer, without
the prior written consent of the Company, Employee shall not, directly or
indirectly, through any form of ownership, in any individual or representative
or affiliated capacity whatsoever, except as may be required by law, reveal,
divulge, disclose or communicate to any person, firm, association, corporation
or other entity in any manner whatsoever information of any kind, nature or
description concerning: (i) the names of any prior or present suppliers or
customers with respect to the Business, (ii) the prices for products or
services with respect to the Business, (iii) the names of personnel with
respect to the Business, (iv) the manner of operation with respect to the
Business, (v) the plans, trade secrets, or other data of any kind, nature or
description, whether tangible or intangible, with respect to the Business, or
(vi) any other financial, statistical or other information regarding the
business acquired by the Company that the Company designates or treats as
confidential or proprietary. The agreements set forth herein shall not apply
to any information that at the time of disclosure or thereafter is generally
available to and known by the public (other than as a result of a disclosure
directly or indirectly by Employee in violation of this Agreement). Without
regard to whether any or all of the foregoing matters would be deemed
confidential, material or important, the parties hereto stipulate that as
between them, the same are important, material and confidential and gravely
affect the effective and successful conduct of the Business and its goodwill.
9. Noncompetition. (a) Employee agrees that during the term of
this Agreement and, upon termination of Employee's employment by the Company
for a period of three (3) years thereafter, he shall not:
(i) Call upon, solicit, divert, take away or attempt to
call upon, solicit, divert or take away any existing customers, suppliers,
businesses, or accounts of the Business in connection with any business
substantially similar to the Business in the territory defined as 100 miles in
and around the Company's and its affiliates operations (the "Territory");
(ii) Hire, attempt to hire, contact or solicit with
respect to hiring for himself or on behalf of any other person any present
employee of the Company in the Business;
(iii) Lend credit, money or reputation for the purpose of
establishing or operating a business substantially similar to the Business in
the Territory;
(iv) Do any act that Employee knew or reasonably should
have known might directly injure the Company in any material respect or that
might divert customers, suppliers or employees from the Business; and
(v) Without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business under the
name "F.Y.I. Incorporated" or any other trade names, trademarks or service
marks heretofore used by the Company or its affiliates.
<PAGE> 7
The covenants in subsections (i) through (v) are intended to restrict
Employee from competing in any manner with the Company or the Business in the
activities that have heretofore been carried on by the Company or its
affiliates. The obligations set forth in subsections (i) through (v) above
shall apply to actions by Employee, through any form of ownership, and whether
as principal, officer, director, agent, employee, employer, consultant,
stockholder or holder of any equity security (beneficially or as trustee of any
trust), lender, partner, joint venturer or in any other individual or
representative or affiliated capacity whatsoever. However, none of the
foregoing shall prevent Employee from being the holder of up to 5.0% in the
aggregate of any class of securities of any corporation engaged in the
activities described in subsection (i) through (v) above, provided that such
securities are listed on a national securities exchange or reported on the
Nasdaq National Market.
10. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all
times to use his best efforts to faithfully discharge his duties under this
Agreement, Employee shall not be held liable to the Company for errors or
omissions made in good faith where Employee has not exhibited negligence or
performed criminal and fraudulent acts which damage the business of the
Company.
11. No Prior Agreements. Employee hereby represents and warrants
to the Company that the execution of this Agreement by Employee and his
employment by the Company and the performance of his duties hereunder will not
violate or be a breach of any agreement with a former employer, client or any
other person or entity. Further, Employee agrees to indemnify the Company for
any claim, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or
may hereafter come to have against the Company based upon or arising out of any
non-competition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
12. Assignment; Binding Effect. Employee understands that he has
been selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding, this Agreement shall be binding upon, inure to the benefit of
and be enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
<PAGE> 8
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the
final, complete and exclusive statement and expression of the agreement between
the Company and Employee and of all the terms of this Agreement, and it cannot
be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This Agreement may not be later
modified except by a further writing signed by a duly authorized officer of the
Company and Employee, and no term of this Agreement may be waived except by
writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall
be given in writing addressed as follows:
To the Company: F.Y.I. Incorporated
3232 McKinney Avenue
Suite 900
Dallas, Texas 75204
Attn: Margot T. Lebenberg, Esq.
To Employee: Joe A. Rose
4604 Mystic Drive
Atlanta, GA 30342
Notice shall be deemed given and effective three (3) days after the deposit in
the United States mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this paragraph 14.
15. Severability; Headings. If any portion of this Agreement is
held invalid or inoperative, the other portions of this Agreement shall be
deemed valid and operative and, so far as is reasonable and possible, effect
shall be given to the intent manifested by the portion held invalid or
inoperative. The paragraph headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define or limit the extent
or intent of the Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three (3) arbitrators in Dallas,
Texas, in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to,
detract from, or modify any provision hereof nor to award punitive damages to
any injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, vesting of options (or cash compensation in lieu of
vesting of options), reimbursement of costs, including those incurred to
enforce this Agreement, and interest thereon in the event the arbitrators
determine that Employee was terminated without disability or good cause, as
defined in paragraphs 4(b) and 4(c), respectively, or that the Company has
otherwise materially breached this Agreement. A decision by a majority of the
arbitration panel shall be final and binding. Judgment may be entered on the
<PAGE> 9
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by the Company.
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Texas.
18. Counterparts. This Agreement may be executed simultaneously
in two (2) or more counterparts, each of which shall be deemed an original and
all of which together shall constitute but one and the same instrument.
19. Attorneys' Fees. In the event of any litigation or
arbitration arising under or in connection with this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees as determined by the
court or arbitration panel, as the case may be. Each party to this Agreement
represents and warrants that it has been represented by counsel in the
negotiation and execution of this Agreement, including without limitation the
provisions set forth in this paragraph 19.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
F.Y.I. INCORPORATED
By: /s/ Ed H. Bowman, Jr.
-------------------------------
Name: Ed H. Bowman, Jr.
Title: President and Chief Executive Officer
EMPLOYEE:
/s/ Joe A. Rose
-------------------------------
Joe A. Rose
<PAGE> 1
Exhibit 21
SUBSIDIARIES
Acadian Consultants Corp.
B&B (Baltimore-Washington) Acquisition Corp.
California Medical Record Service Acquisition Corp.
CH Acquisition Corp.
Computer Central Corporation
Deliverex Acquisition Corp.
Deliverex Sacramento Acquisition Corp.
DISC Acquisition Corp.
DPAS Acquisition Corp.
Imagent Acquisition Corp.
Information Management Acquisition Corp.
Input of Texas, Inc.
Leonard Archives Acquisition Corp.
Major Acquisition Corp.
MAVRICC Management Systems, Inc.
Minnesota Medical Record Service Acquisition Corp.
MMS Escrow and Transfer Agency, Inc.
Permanent Records Acquisition Corp.
Premier Acquisition Corp.
QCS Inet Acquisition Corp.
Recordex Acquisition Corp.
Researchers Acquisition Corp.
Robert A. Cook Acquisition Corp.
The Rust Consulting Group, Inc.
TBC Acquisition Corp.
Texas Medical Record Service Acquisition Corp.
Zia Acquisition Corp.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,939
<SECURITIES> 0
<RECEIVABLES> 24,860
<ALLOWANCES> 1,406
<INVENTORY> 1,126
<CURRENT-ASSETS> 35,464
<PP&E> 28,085
<DEPRECIATION> 13,158
<TOTAL-ASSETS> 104,560
<CURRENT-LIABILITIES> 13,893
<BONDS> 4,558
0
0
<COMMON> 101
<OTHER-SE> 86,231
<TOTAL-LIABILITY-AND-EQUITY> 104,560
<SALES> 3,814
<TOTAL-REVENUES> 66,576
<CGS> 2,774
<TOTAL-COSTS> 42,050
<OTHER-EXPENSES> 376
<LOSS-PROVISION> 600
<INTEREST-EXPENSE> 355
<INCOME-PRETAX> 7,301
<INCOME-TAX> 2,984
<INCOME-CONTINUING> 4,317
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,317
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
