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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between F.Y.I.
Incorporated, a Delaware corporation (the "Company"), and Charles S. Gilbert
("Employee") is hereby entered into and effective as of August 1, 2000. 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 business of providing document and information management outsourcing
solutions.
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 Vice President, General
Counsel and Secretary. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of a Vice President, General
Counsel and Secretary and will report directly to the Company's Chief Executive
Officer. 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 (i) does not
interfere with Employee's duties and responsibilities hereunder and (ii) does
not violate paragraph 3 hereof. The foregoing limitations shall not be construed
as prohibiting Employee from serving on the boards of directors of other
companies or making personal investments in such form or manner as will require
his services (if only to a
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minimal extent), in the operation or affairs of the companies or enterprises
in which such investments are made nor violate the terms of paragraph 3
hereof.
2. COMPENSATION. For all services rendered by Employee, the Company
shall compensate Employee as follows:
(a) BASE SALARY. The base salary payable to Employee shall be $200,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less than bi-weekly.
(b) INCENTIVE BONUS PLAN. Employee shall be eligible for a bonus
opportunity of up to 50% of his annual base salary in accordance with the
Company's Incentive Bonus Plan as modified from time to time. The bonus payment
and the Company's targeted performance shall be determined by the Board or the
compensation committee thereof. For the year in which this Employment Agreement
is executed, the maximum bonus opportunity shall be for $89,000 (which
represents 50% of a blended salary).
(c) EXECUTIVE PERQUISITES, BENEFITS AND 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 his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company may have in
effect from time to time, and not less favorable than the benefits
provided to other Company executives.
(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. 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 (prorated for any year in which Employee is employed for
less than the full year).
(iv) An automobile allowance in the amount of $500 per month.
(v) 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 will include
participation in the Company's Incentive Compensation Plan.
(vi) Participation in the Company's 401(k) Plan and
Non-Qualified Plan.
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(vii) The Company shall pay Employee's bar association and CLE
(continuing legal education) related expenses (including travel and
lodging if required).
3. NON-COMPETITION AGREEMENT.
(a) Subject to Section 3(a) and Section 12, Employee will not, during
the period of his employment by or with the Company, and for a period of two (2)
years immediately following the termination of his employment under this
Agreement, for any reason whatsoever, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, company, partnership,
corporation, business or entity of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with the Company, within 100 miles of (i) the
principal executive offices of the Company or (ii) any place to which
the Company provides products or services or in which the Company
(including the subsidiaries thereof) is in the process of initiating
business operations during the term of this covenant (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company (including the subsidiaries
thereof) in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company
(including the subsidiaries thereof), provided that Employee shall be
permitted to call upon and hire any member of his immediate family;
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Company (including the subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services
in direct competition with the Company within the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was either called upon by the Company (including the subsidiaries
thereof) or for which the Company made an acquisition analysis, for the
purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of
the Company (or the subsidiaries thereof) to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than three percent
(3%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
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(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
covenant may be enforced by the Company in the event of breach by him by
injunctions and restraining orders without the necessity of posting any bond
therefor.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company (including the Company's subsidiaries) on the date
of the execution of this Agreement and the current plans of the Company
(including the Company's subsidiaries); but it is also the intent of the Company
and Employee that such covenants be construed and enforced in accordance with
the changing activities, business and locations of the Company (including the
Company's subsidiaries) throughout the term of this covenant, whether before or
after the date of termination of the employment of Employee, subject to the
following paragraph. For example, if, during the Term of this Agreement, the
Company (including the Company's subsidiaries) engages in new and different
activities, enters a new business or established new locations for its current
activities or business in addition to or other than the activities or business
enumerated under the Recitals above or the locations currently established
therefor, then Employee will be precluded from soliciting the customers or
employees of such new activities or business or from such new location and from
directly competing with such new business within 100 miles of its
then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event
that Employee shall cease to be employed hereunder, and shall enter into a
business or pursue other activities not in competition with the Company
(including the Company's subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company (including the Company's
subsidiaries) shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent that the court deems reasonable, and the
Agreement shall thereby be reformed to such extent.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of two (2) years following Employee's employment set
forth
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at the beginning of this paragraph 3, during which the agreements and
covenants of Employee made in this paragraph 3 shall be effective, shall be
computed by excluding from such computation any time during which Employee is
in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee's place of employment is the Company's headquarters in
Dallas, Texas. Employee understands that he may be requested by the Board to
relocate from his present 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
the event that Employee is requested to relocate and agrees to do so, the
Company will pay all relocation costs 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;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur, as a result of any payment hereunder, to the extent any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result 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 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue through December 31, 2001 (the
"Term"). This Agreement and Employee's employment may be terminated earlier 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. 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 four (4) consecutive months, then thirty
(30) days after receiving written notice (which notice may occur before
or after the end of such four (4) month period, but which shall not be
effective earlier than the last day of such four (4) month period), the
Company may terminate Employee's employment hereunder provided Employee
is unable to 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
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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 one (1) year.
(c) GOOD CAUSE. The Company may terminate the Agreement ten
(10) days after written notice to Employee for good cause, which shall
be: (1) Employee's material and irreparable breach of this Agreement;
(2) Employee's gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of the
written notice) of any of Employee's material duties and
responsibilities hereunder; (3) Employee's dishonesty, fraud or
misconduct with respect to the business or affairs of the Company which
materially and adversely affects the operations or reputation of the
Company; (4) Employee's conviction of a felony crime; or (5) 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 thirty (30) days after written
notice is provided to the Employee. 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 one (1) year ("Severance Pay").
Further, any termination without cause by the Company shall operate to
shorten the period set forth in paragraph 3(a) and during which the
terms of paragraph 3 apply to one (1) year from the date of termination
of employment.
(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
ten (10) days' prior written notice by Employee to the Company,
specifying the basis for such Employee's having Good Reason to
terminate this Agreement:
(i) the assignment to Employee of any duties materially and
adversely inconsistent with Employee's position as specified in
paragraph 1 hereof (or such other position to which he may be
promoted), including status, offices, responsibilities or persons to
whom Employee reports as contemplated under paragraph 1 of this
Agreement, or any other action by the Company which results in a
material and adverse change in such position, status, offices, titles
or responsibilities;
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(ii) Employee's removal from, or failure to be reappointed or
reelected to, Employee's position under this Agreement during the term
of this Agreement (though this provision shall not entitle Employee to
any extension or renewal of the Term of this Agreement), except as
contemplated by paragraphs 5(a), (b), (c) and (e); or
(iii) any other material breach of this Agreement by the
Company that is not cured within the ten (10) day time period set forth
in paragraph 5(f) above, including the failure to pay Employee on a
timely basis the amounts to which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, as determined
by a court of competent jurisdiction or pursuant to the provisions of paragraph
16 below, the Company shall pay all amounts and damages (which damages shall not
include payment of salary for the then unexpired Term in light of the Severance
Pay set forth below), 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. In
addition, Employee shall be entitled to receive Severance Pay for one (1) year.
Further, none of the provisions of paragraph 3 shall apply in the event this
Agreement is terminated by Employee for Good Reason.
(f) TERMINATION BY EMPLOYEE WITHOUT GOOD REASON. If Employee resigns or
otherwise terminates his employment without Good Reason pursuant to
paragraph 5(f), Employee shall receive no severance compensation.
(g) CHANGE OF CONTROL. Refer to paragraph 12, below.
Upon termination of this Agreement for any reason provided in clauses (a)
through (g) above, Employee shall be entitled to receive all compensation earned
and all benefits vested and reimbursements 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 9 herein
and Employee's obligations under paragraphs 3, 6, 7, 8, 9 and 10 herein shall
survive such termination in accordance with their terms.
6. 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 (including
the Company's subsidiaries) or its representatives, vendors or customers which
pertain to the business of the Company (including the Company's subsidiaries)
shall be and remain the property of the Company and be subject at all times to
its 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 (including the Company's subsidiaries)
that is collected by Employee shall be
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delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. 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 (including the Company's subsidiaries) and which
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.
8. 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 (including the Company's subsidiaries) relationships or agreements
with its significant vendors or customers or any other significant and material
trade secret of the Company (including the Company's subsidiaries), whether in
existence or proposed, to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever, except as is disclosed in the ordinary
course of business.
9. 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 cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.
10. 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
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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.
11. 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 two (2) sentences and the express provisions of paragraph 12
below, 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.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder.
(b) Provided that Employee would have been an employee of the Company
for at least one year at the time of such Change in Control, then in the event
of a pending Change in Control wherein the Employee has not received written
notice at least fifteen (15) business days prior to the anticipated closing date
of the transaction giving rise to the Change in Control from the successor to
all or a substantial portion of the Company's business and/or assets that such
successor is willing as of the closing to assume and agree to perform the
Company's obligations under this Agreement in the same manner and to the same
extent that the Company is hereby required to perform, such Change in Control
shall be deemed to be a termination of this Agreement by the Company and the
amount of the lump-sum severance payment due to Employee shall be 1 times
Employee's annual salary immediately prior to the Change in Control and the
non-competition provisions of paragraph 3 shall not apply whatsoever. Payment
shall be made either at closing of the transaction if notice is served at least
five (5) days before closing or within ten (10) days of Employee's written
notice.
(c) Provided that Employee would have been an employee of the Company
for at least one year at the time of such Change in Control, then in any Change
in Control situation in which Employee has received written notice from the
successor to the Company that such pending successor is willing to assume the
Company's obligations hereunder or Employee receives notice after the Change in
Control that Employee is being terminated, Employee may nonetheless, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at any time prior to closing of the transaction and up to two (2) years
after the closing of the transaction giving rise to the Change in Control. In
such case, the amount of the lump-sum severance payment due to Employee shall be
1 times Employee's annual salary immediately prior to the Change in Control and
the non-competition provisions of paragraph 3 shall all apply. Payment shall be
made either at closing if notice is served at least five (5) days before closing
or within ten (10) days of written notice by Employee.
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(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
later of the closing date of the transaction giving rise to the Change in
Control or Employee's notice as described above, and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at such time. Further, Employee will be given sufficient time in order
to comply with then Securities and Exchange Commission's regulations to elect
whether to exercise and sell all or any of his vested options to purchase
Common Stock of the Company, including any options with accelerated vesting
under the provisions of the Company's 1995 Stock Option Plan, as amended (and
as modified by the related option agreement/certificate in accordance with such
Plan) or any warrants, such that he may convert such options or warrants to
shares of Common Stock of the Company at or prior to the closing of the
transaction giving rise to the Change in Control, if he so desires. Employee
acknowledges that his option agreement/certificate provides that not all of
such options vest on a Change in Control under certain circumstances.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit
plan of the Company, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company and
immediately after such acquisition such Person is, directly or
indirectly, the Beneficial Owner of voting securities representing 50%
or more of the total voting power of all of the then-outstanding voting
securities of the Company;
(ii) the individuals (A) who, as of the effective date of the
Company's registration statement with respect to its initial public
offering, constitute the Board of Directors of the Company (the
"Original Directors") or (B) who thereafter are elected to the Board of
Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election) or (C) who are elected to the
Board of Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election), cease for any reason to constitute a majority of the members
of the Board of Directors of the Company;
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of the Company immediately prior to the
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transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the
Company).
(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in
Control may take place.
(g) If any portion of the severance benefits, Change in Control
benefits or any other payment under this Agreement, or under any other
agreement with, or plan of the Company, including but not limited to stock
options, warrants and other long-term incentives (in the aggregate "Total
Payments") would be subject to the excise tax imposed by Section 4999 of the
Code, as amended (or any similar tax that may hereafter be imposed) or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Employee shall be entitled under this
paragraph to an additional amount (the "Gross-Up Payment") such that after
payment by Employee of all of Employee's applicable Federal, state and local
taxes, including any Excise Tax, imposed upon such additional amount, Employee
will retain an amount equal to the Excise Tax imposed on the Total Payments.
For purposes of this paragraph Employee's applicable Federal, state
and local taxes shall be computed at the maximum marginal rates, taking into
account the effect of any loss of personal exemptions resulting from receipt of
the Gross-Up Payment.
All determinations required to be made under this Agreement, including
whether a Gross-Up Payment is required under this paragraph, and the
assumptions to be used in determining the Gross-Up Payment, shall be made by
the Company's current independent accounting firm, or such other firm as the
Company may designate in writing prior to a Change in Control (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the
Company and Employee within twenty business days of the receipt of notice from
Employee that there will likely be a Change in Control, or such earlier time as
is requested by the Company. In the event that the Accounting Firm is serving
as accountant or auditor for the party effecting the Change in Control or is
otherwise unavailable, Employee may appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm with respect to such determinations described
above shall be borne solely by the Company.
Employee agrees (unless requested otherwise by the Company) to use
reasonable efforts to contest in good faith any subsequent determination by the
Internal Revenue Service that Employee owes an amount of Excise Tax greater
than the amount determined pursuant to this paragraph; PROVIDED, that Employee
shall be entitled to reimbursement by the Company of all fees and expenses
reasonably incurred by Employee in contesting such determination. In the
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event the Internal Revenue Service or any court of competent jurisdiction
determines that Employee owes an amount of Excise Tax that is either greater
than the amount previously taken into account and paid under this Agreement,
the Company shall promptly pay to Employee the amount of such shortfall. In the
case of any payment that the Company is required to make to Employee pursuant
to the preceding sentence (a "Later Payment"), the Company shall also pay to
Employee an additional amount such that after payment by Employee of all of
Employee's applicable Federal, state and local taxes, including any interest
and penalties assessed by any taxing authority, on such additional amount,
Employee will retain an amount equal to the total of Employee's applicable
Federal, state and local taxes, including any interest and penalties assessed
by any taxing authority, arising due to the Later Payment.
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 and may only be amended by a written
agreement executed by each of the parties hereto.
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
with a copy to: F.Y.I. Incorporated
3232 McKinney Avenue
Suite 900
Dallas, Texas 75204
Attn: General Counsel
with a copy to: Locke Liddell & Sapp LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201
Attn: Charles C. Reeder, Esq.
To Employee: Charles S. Gilbert
5520 Emerson
Dallas, TX 75209
12
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Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. 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 5(b) and 5(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
arbitrators' award in any court having jurisdiction. The costs of any
arbitration proceeding shall be borne by the party or parties not prevailing in
such proceeding determined by the arbitrators.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Delaware.
[BALANCE OF SHEET INTENTIONALLY LEFT BLANK]
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EMPLOYEE:
/s/ Charles S. Gilbert
--------------------------
Charles S. Gilbert
F.Y.I. INCORPORATED
By: /s/ Ed H. Bowman, Jr.
-----------------------
Title: President & CEO
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